Essential Trusts for Everyday Families in Michigan: Revocable, Joint, and Standby

Scenario: The Up-North Cottage Catastrophe

You own a 4-bedroom home in Delta Township (Lansing) and a beloved family cottage in Cheboygan. You pass away, leaving everything to your three children in a basic will. You thought that would keep things simple.

Instead, your grieving children are now stuck opening a case in the Ingham County Probate Court. Because the cottage is in a different county, they have to navigate complex administrative hurdles. They wait nine months just to get the Letters of Authority (MCL 700.3103) needed to pay the property taxes on the cottage, draining thousands of dollars from the estate in the process. All of this was entirely avoidable.

It is a common misconception that trusts are only for the ultra-wealthy. In reality, everyday middle-class families in Michigan are often the ones who benefit the most from properly structured foundational trusts. Without them, your estate is subject to public, expensive, and time-consuming court proceedings.

Key Takeaways

• Foundational trusts allow your family to bypass probate court entirely, keeping your estate private and saving thousands in fees.
• Revocable and Joint Trusts allow you to maintain complete control over your assets while you are alive and healthy.
• Not all trusts avoid probate. Testamentary trusts, which are written into a standard will, still require court oversight before they are funded.

---

1. The Revocable Living Trust: The Workhorse of Estate Planning

The Revocable Living Trust is the cornerstone of modern estate planning. You, the Grantor, transfer your assets (like your Lansing home, bank accounts, and investment portfolios) into the trust. Because it is "revocable," you can change, amend, or dissolve it at any time during your life.

Why is this essential? Because assets owned by a living trust do not go through probate when you die. Your hand-picked successor trustee simply steps in and distributes the assets according to your rules.

If you are wondering exactly how much your family stands to lose if you rely on a simple will instead of a living trust, you can run the numbers yourself using our Michigan Probate Cost Calculator. The results are often staggering when you account for statutory probate inventory fees based on gross asset value (MCL 600.871).

While a trust is revocable, rights of the trust beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor.

Citation: MCL 700.7605

To be effective, this trust must be properly funded. Michigan law grants trustees broad powers to manage these assets once transferred, including the power to acquire, sell, or manage trust property without requiring prior court authorization (MCL 700.7816).

Revocable Living Trust: Pros & Cons

• Pros: Total control during your lifetime, completely avoids probate court, keeps family financial affairs strictly private, and provides a seamless transition of management if you become incapacitated.
• Cons: Requires a higher upfront cost and more effort to create than a basic will. It also requires diligent funding (transferring assets into the trust).

2. Joint Trusts: Streamlined Planning for Married Couples

In Michigan, many married couples hold property as tenants by the entirety. While this offers excellent creditor protection and seamlessly transfers property to the surviving spouse upon the first death, it fails catastrophically when the second spouse dies.

A Joint Revocable Trust solves this. It is a single trust created by both spouses (governed in part by MCL 700.7602 regarding the administration and revocation of trusts with two or more settlors).

• Both spouses serve as co-trustees and manage their marital assets together, easing management difficulties.
• When the first spouse passes or becomes incapacitated, the surviving spouse continues as the sole trustee without missing a beat.
• When the second spouse passes, the successor trustee distributes the combined estate to the children or chosen beneficiaries.

However, married couples must carefully balance convenience with liability. Property held jointly in a trust does not automatically retain the exact same impenetrable creditor protection as property held strictly as Tenants by the Entirety. Additionally, Michigan law explicitly dictates how these trusts are managed if one spouse wants out: unless the trust states otherwise, either spouse can revoke the trust as to the portion of the property attributable to their contribution (MCL 700.7602(2)(b)). For a clear example of how courts interpret trust contract language in these situations, you can review this unpublished case from the Michigan Court of Appeals (Justia).

Joint Trust: Pros & Cons

• Pros: Highly streamlined asset management for married couples, ensures the surviving spouse has immediate, uninterrupted access to all funds, and is generally more cost-effective to draft than two separate, standalone trusts.
• Cons: Can expose assets to creditors differently than a tenancy by the entirety, and can become legally complex if the surviving spouse later remarries or wishes to change the ultimate beneficiaries after the first spouse dies.

3. Testamentary Trusts: The Danger Zone of Formal Planning

A Testamentary Trust is not a standalone document; it is a trust provision embedded directly into your Last Will and Testament. It springs into existence only after you die, which subjects it to the ongoing jurisdiction of the probate court (MCL 700.7201).

While they are generally less efficient than a Revocable Living Trust, Testamentary Trusts can be useful in highly specific scenarios, such as parents with minor children who simply cannot afford to draft a comprehensive living trust right now but need basic guardrails in place. Under Michigan law, the probate court retains exclusive jurisdiction over the internal affairs of these trusts (MCL 700.7202), meaning the trustee may have to regularly report back to a judge.

Testamentary Trust: Pros & Cons

• Pros: Lower initial creation cost, and serves as an effective emergency backup plan for parents of young children with limited current assets.
• Cons: Unless the value of your estate is very low, it will go through probate. This means your family will face court fees, public scrutiny of the estate, and significant delays before the trust is actually funded and usable by your beneficiaries.

However, for a complete picture of why this fits into a broader, holistic plan, you should review our foundational overview in Comprehensive Estate Planning Michigan: The Ultimate Guide to Types of Trusts.

4. The Standby Trust: Protection Against Incapacity

A Standby Trust (also known as a wait-and-see trust or dormant trust—not to be confused with the wait-and-see doctrine related to perpetuities, as discussed in Lawrence W. Waggoner, Perpetuities: A Perspective on Wait-and-See, 85 Colum. L. Rev. 1714, 1718 (1985)) is created during your lifetime but remains largely unfunded (i.e. empty) until a specific triggering event occurs. This triggering event is usually your mental or physical incapacity.

If you suffer a stroke or develop dementia, your designated agent under a Durable Power of Attorney (MCL 700.5501) can transfer your assets into the Standby Trust. This allows your successor trustee to step in and manage your finances seamlessly, completely bypassing the need for a humiliating and restrictive probate court guardianship or conservatorship proceeding (MCL 700.5401).

Standby Trust: Pros & Cons

• Pros: Prevents the public exposure, emotional drain, and financial expense of a court-mandated conservatorship hearing. It keeps your initial estate planning setup lean while providing a powerful safety net for medical emergencies.
• Cons: Its effectiveness relies entirely on your Agent under the Durable Power of Attorney acting swiftly and correctly. If the Power of Attorney is defective, outdated, or rejected by your financial institutions, the Standby Trust remains unfunded and court intervention becomes inevitable.

Taking the Next Step

Everyday families in Michigan do not need overly complicated tax-shelter trusts, but they do need a plan that keeps them out of probate court and protects their children from administrative nightmares. Establishing your foundational trust is the most loving thing you can do for your family's future.

If you are ready to put these protections in place for your loved ones, Alpin Law can help. Contact us today to schedule a consultation and secure your family's future.