Can you trust your trust to protect your asse
The federal inheritance tax estate exemption used to be relatively low, for example $675,000 in 2001. This prompted many married couples to transfer their jointly-owned real property to a trust for the purpose of dividing ownership of the property upon the death of one spouse so that it did not pass to the survivor. The intended effect was to increase the inheritance-tax exemption so that less of the estate would go to the federal government in the form of inheritance tax.Under Michigan law, real property as well as certain personal property (including stocks, bonds and mutual funds) can be owned by spouses as tenants by the entirety (TBE). TBE property is exempt from the claims of creditors of only one of the spouses. This is one of the most important creditor protections available under Michigan law to married persons.Although the law of several other states permits, or arguably permits, property held in a trust to remain in a TBE, no court has held that property owned in trust governed by Michigan law can be protected as TBE property. We are currently handling a case which may test whether a trust governed by Michigan law can hold property in a TBE. Unless the law changes, if you own significant assets in a trust, you may want to consider whether protection from inheritance tax that no longer applies to most estates is more important than protection from creditors. Call us for advice on protecting your assets