How can trust assets be protected from creditors?
Trust assets can be protected from creditors in Michigan through an irrevocable trust. An irrevocable trust is a legal entity that is created to hold assets. Assets held in such a trust are not owned by the grantor, and are not subject to the grantor’s creditors. The grantor of the trust is the person who creates the trust and donates assets to it. The trustee of the trust is an individual or institution, such as a bank or trust company, who is given the responsibility of managing the trust assets and making distributions to beneficiaries according to the terms of the trust document. Once assets are placed into the trust, the grantor no longer has control over them, thus making them exempt from any creditor’s claims. Trust assets could also be further protected by naming a trustee with a “spendthrift” clause which prohibits the beneficiaries from alienating their interest in the trust. This means that, even if the assets are distributed to the beneficiaries, creditors would not be able to access those assets. Finally, the trust document could be set up in such a way that beneficiaries receive only income payments, not principal, which would also protect the trust assets from creditors. By taking these steps, the trust assets can be protected from creditors in Michigan.
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