Creating a trust in Michigan can help reduce estate taxes and ensure your assets are distributed according to your wishes. When you set up a trust, you can potentially minimize the amount of taxes owed upon your death. This can be especially important if you have a large estate or want to leave behind significant assets to your loved ones.
Estate taxes and how they work in Michigan
In Michigan, the state does not impose an estate tax, but the federal government has an estate tax that applies to estates over a certain threshold. For 2025, the federal estate tax exemption is $12.92 million, meaning that if your estate is worth less than this amount, you won’t owe federal estate taxes. However, estates exceeding this amount may be subject to estate tax at rates that can range from 18% to 40%.
Trusts and their role in reducing taxes
A trust, particularly an irrevocable trust, can help shield assets from estate taxes by removing them from your estate. When you transfer assets into an irrevocable trust, those assets are no longer part of your taxable estate, and you may lower the overall estate tax liability. This can be an effective strategy for high-net-worth individuals looking to preserve their wealth for future generations.
Types of trusts that can reduce estate taxes
Several types of trusts can help reduce estate taxes in Michigan, such as irrevocable trusts, charitable remainder trusts (CRT), and generation-skipping trusts (GST). Irrevocable trusts remove assets from your estate, which can help reduce estate tax exposure. Charitable remainder trusts (CRTs) allow you to donate assets to charity while continuing to receive income from them during your lifetime, which can reduce your taxable estate. Generation-skipping trusts (GSTs) allow you to transfer wealth to grandchildren or other beneficiaries two generations below you, which can help reduce estate taxes across generations.
A trust can play a significant role in reducing estate taxes in Michigan. It’s important to understand the various types of trusts available and how they can be used to your advantage in preserving wealth. While Michigan does not impose an estate tax, federal estate taxes can still apply, and trusts can help reduce the overall taxable estate.
