Effective in early 2017, Michigan will be the 17th state to enact self-settled spendthrift trust legislation. This new law will allow for the creation of trusts in Michigan under which the settlor (trust-creator/ grantor/trustmaker) can name himself or herself, along with one or more other beneficiaries, as a discretionary beneficiary of the trust, and as such, be eligible to receive distributions from the trust.
The trust would have the effect of providing lawsuit protection in the appropriate circumstances.
The law provides generally that there is only a two year period in which a creditor can challenge certain transfers of assets to the trust. The new law also makes it more difficult to successfully lodge any such challenge.
Any transfers to the trust will need to be accompanied by a signed affidavit averring, among other things, that the settlor has no pending creditor issues (except as disclosed in the affidavit) and does not anticipate bankruptcy. Among the statements to be made in the affidavit is that the settlor is not more than thirty days in arrears on any child support obligations.
Having yet another state (the 8th largest state) adopt asset protection trust law is further testimony to the fact that asset protection trusts are accepted as effective vehicles that limit one’s exposure of his or her net worth to the risk of creditor and predator claims.