Using a Trust to Manage Real Estate in Michigan

Whether you own a family home, cottage, rental property, or commercial building, placing real estate in a trust can make management and future transfers easier. A properly funded trust can help real estate pass outside probate, provide continuity of management after incapacity or death, and establish instructions for how the property will be managed or distributed.

How a Trust Can Help

A trust can provide a framework for owning, managing, and transferring real estate according to the terms selected by the property owner. The trustee has legal authority to manage trust-owned property, including maintaining, leasing, selling, or distributing it, subject to the trust's terms.

A trust can be particularly useful for:

• A primary residence: A trust can help a home pass outside probate and give the successor trustee authority to manage or sell it when needed.

• A cottage or vacation property: The trust can establish rules for family use, repairs, expenses, buyouts, and an eventual sale.

• Rental or investment property: The trustee can collect rents, pay expenses, hire property managers, and distribute income under the trust terms.

• Commercial property: A trust can provide continuity for leases, insurance, maintenance, and ownership transition after the owner’s death or incapacity.

For rental and commercial property, an LLC may also be appropriate for operational and liability reasons. In some cases, a trust owns the owner’s LLC interest rather than holding title to the real estate directly.

Revocable Versus Irrevocable Trusts

• Revocable living trust: A revocable living trust is often used to avoid probate and plan for incapacity. The person who creates it can generally amend or revoke the trust, move assets in or out, and continue managing trust property during life. However, a revocable trust does not, by itself, protect the owner’s assets from the owner’s creditors.

• Irrevocable trust: An irrevocable trust may be appropriate for more specialized asset-protection, tax, Medicaid, or beneficiary-protection planning. It generally requires the creator to give up significant control over the property, so use it only after careful legal analysis.

Important Michigan Considerations

Before transferring Michigan real estate to a trust, review the property’s mortgage, insurance, lease terms, title issues, and any homeowners’ association requirements with an experienced attorney. An attorney can also help evaluate potential property-tax and Principal Residence Exemption consequences.

A trust must also be properly funded. For real estate, that generally means preparing and recording a deed that transfers title from the individual owner to the the trust. Creating a trust document alone does not transfer property ownership into the trust.

The Right Plan for You

The best structure depends on the property and your goals. A trust may be especially valuable if you want to avoid probate, plan for incapacity, provide management instructions, or protect a beneficiary who should not receive real estate outright.

If you are considering transferring real estate to a trust or creating an estate plan, contact Jabbour Law today to schedule a consultation. We can help you review title and tax considerations, prepare the necessary documents, and create an estate plan that fits your long-term goals.