When Metro Detroit families begin estate planning, one of the most important decisions they face is whether to use a revocable living trust, an irrevocable trust, or some combination of both. Each type of trust serves different purposes, and choosing the wrong one can mean missing out on important benefits or creating unintended tax consequences.
The distinction matters because these trusts operate very differently. A revocable living trust gives you flexibility and control during your lifetime while helping your family avoid probate after your death. An irrevocable trust requires you to give up control, but in exchange may provide estate tax benefits, asset protection, or Medicaid planning advantages that a revocable trust cannot offer.
This guide explains how revocable and irrevocable trusts work under Michigan law, compares their pros and cons for probate avoidance, taxes, and asset protection, and helps Wayne County and Metro Detroit families understand when each type of trust makes sense for their situation.
Understanding the Key Differences
Revocable Living Trusts
A revocable living trust is created during your lifetime and can be amended or revoked at any time while you remain mentally competent. Under MCL 700.7602, a settlor may revoke or amend a revocable trust unless the trust terms expressly state otherwise.
With a revocable trust, you typically serve as both the trustee and primary beneficiary during your lifetime, retaining complete control over the assets you transfer into the trust. You can add or remove assets, change beneficiaries, modify distribution terms, or dissolve the trust entirely.
At your death, the trust typically becomes irrevocable. A successor trustee you have named takes over and distributes assets to your beneficiaries according to the trust terms—without the need for court-supervised probate.
Irrevocable Trusts
An irrevocable trust generally cannot be revoked or amended by the grantor once established. When you create an irrevocable trust and transfer assets into it, you give up ownership and control of those assets. The trust becomes a separate legal entity with its own tax identification number and reporting requirements.
Michigan law does allow limited modifications to irrevocable trusts through court approval, consent of beneficiaries, decanting to a new trust, or nonjudicial settlement agreements. However, these mechanisms have strict requirements and may trigger tax consequences if beneficial interests change.
Common types of irrevocable trusts include irrevocable life insurance trusts (ILITs), gifting trusts for wealth transfer, and certain Medicaid planning trusts such as Medicaid Asset Protection Trusts.
Probate Avoidance and Privacy
Revocable Trusts
The primary benefit of a revocable living trust for most Metro Detroit families is avoiding probate. When assets are properly titled in the name of your trust, they pass directly to your beneficiaries at your death without going through Wayne County Probate Court or any other Michigan probate court.
This means faster distributions to your family, reduced court costs, and greater privacy. Unlike a will, which must be filed with the probate court and becomes a public record, a revocable trust document generally does not need to be filed with the court. Your beneficiaries, asset values, and distribution terms remain private.
Revocable trusts also provide seamless incapacity planning. If you become unable to manage your affairs due to illness or cognitive decline, your successor trustee can step in immediately to manage trust assets without the need for a court-appointed conservatorship.
Irrevocable Trusts
Assets in properly structured irrevocable trusts also avoid probate because the trust—not you as an individual—holds legal title. However, administration is more complex. An independent trustee must manage the trust according to its terms, file separate fiduciary income tax returns, and maintain strict records.
Disputes over irrevocable trusts may require court involvement if beneficiaries seek modifications, accountings, or trustee removal. Probate Courts handle these proceedings when the trust has sufficient connection to the specific county.
Tax Implications
Revocable Trusts and Taxes
A revocable living trust is a “disregarded entity” for income tax purposes. While the trust is revocable, all income earned by trust assets is reported on your personal tax return, just as if you still owned the assets individually.
For federal estate tax purposes, assets in a revocable trust are included in your taxable estate. Creating a revocable trust by itself does not reduce estate taxes. However, revocable trusts can be drafted to include tax-efficient provisions—such as marital trusts and credit shelter trusts—that become relevant for high-net-worth Metro Detroit families with estates approaching the federal exemption.
Irrevocable Trusts and Taxes
Properly structured irrevocable trusts can remove assets from your taxable estate for federal estate and gift tax purposes. This is because you have given up ownership and control of the transferred assets. For families with significant wealth, this can result in substantial estate tax savings.
However, transfers to irrevocable trusts are typically treated as taxable gifts for any amount over the annual gift exclusion limit. Whether these gifts use your annual exclusion ($19,000 per recipient in 2026, or $38,000 for married couples) or reduce your lifetime exemption depends on how the trust is structured, how much is gifted at any one time, and whether beneficiaries have certain withdrawal rights.
Irrevocable trusts that accumulate income pay federal income tax at compressed brackets—reaching the highest marginal rate at relatively low income levels. Distributing income to beneficiaries can shift the tax burden to them, often at lower rates.
Estate Tax Context for 2026
The federal estate and gift tax exemption for 2026 is $15,000,000 per individual, or $30,000,000 per married couple using portability. The top estate tax rate is 40 percent on amounts exceeding the exemption.
Most Metro Detroit families have estates well below this threshold and will focus on probate avoidance and family protection rather than estate tax reduction. However, families with significant wealth, business interests, or rapidly appreciating assets may benefit from irrevocable trust strategies that shift value out of their taxable estates.
Asset Protection Considerations
Revocable Trusts
A revocable living trust provides no asset protection during your lifetime. Because you retain the power to revoke the trust and access its assets, creditors can reach those assets just as if you owned them individually. The trust also does not protect assets from nursing home costs or Medicaid spend-down requirements.
Irrevocable Trusts
Properly structured irrevocable trusts may provide meaningful asset protection because you no longer own or control the transferred assets. Depending on the trust terms and timing of transfers, assets in an irrevocable trust may be protected from your future creditors.
Some families use irrevocable trusts as part of long-term care and Medicaid planning. However, Medicaid has a five-year look-back period for asset transfers, and the rules governing when trust assets are considered “available” for Medicaid purposes are complex. These strategies require careful planning well in advance of any anticipated need for nursing home care.
Creating and Funding Trusts in Michigan
Setting Up a Revocable Living Trust
Creating a revocable living trust requires a written trust agreement signed by you as the grantor. The agreement must clearly identify the trustee, successor trustees, beneficiaries, and distribution terms.
For the trust to accomplish its probate-avoidance goals, you must fund it by transferring assets into the trust’s name. This typically means executing new deeds for real estate, retitling bank and investment accounts, and updating beneficiary designations where appropriate. Assets left outside the trust may still require probate.
Setting Up an Irrevocable Trust
Irrevocable trusts require carefully drafted agreements that limit your retained powers to achieve the desired tax or asset protection benefits. Many irrevocable trusts require an independent trustee—someone other than you—to manage the trust and make distribution decisions.
Funding an irrevocable trust involves making completed gifts of assets. Depending on the trust structure, you may need to file a federal gift tax return and may use annual exclusion gifts or a portion of your lifetime exemption.
Metro Detroit Counties Probate Courts
Most family trusts operate entirely outside court supervision. You do not need court approval to create a revocable or irrevocable trust for your family.
However, trustees may optionally register a trust with any of the Metro Detroit county Probate Courts under MCL 700.7209 using SCAO Form PC 610. The filing fee is $25. Registration creates a public record that the trust exists but does not require filing the full trust document. Registration is not required for most family trusts but may be appropriate in certain circumstances.
The County Probate Court where the trust was registered becomes involved when disputes arise—such as petitions to interpret trust terms, remove a trustee, or approve modifications—or when court-supervised trusts are established for minors or incapacitated adults.
When to Choose Revocable vs. Irrevocable Trusts
When a Revocable Trust Makes Sense
A revocable living trust is typically the right choice for Metro Detroit families who want to:
- Avoid probate in Wayne, Oakland, or Macomb County
- Maintain privacy about their estate and beneficiaries
- Retain full control and flexibility during their lifetime
- Plan for potential incapacity without court involvement
- Simplify administration for their families after death
For families with estates well below the $15 million federal exemption, a revocable living trust addresses the most common estate planning concerns without the complexity of irrevocable planning.
When an Irrevocable Trust May Be Appropriate
Irrevocable trusts may be worth considering for Metro Detroit families who:
- Have estates approaching or exceeding the federal estate tax exemption
- Own rapidly appreciating assets or business interests they want to shift out of their taxable estate
- Want to use life insurance for estate tax liquidity while keeping proceeds outside their estate
- Are planning for potential long-term care needs and Medicaid eligibility well in advance
- Need enhanced creditor protection for specific assets
Many comprehensive estate plans use both revocable and irrevocable trusts together, with each serving different purposes.
Frequently Asked Questions About Trusts in Metro Detroit
Can I convert a revocable trust into an irrevocable trust?
A revocable trust becomes irrevocable by its terms at your death. During your lifetime, you can amend a revocable trust to remove your power to revoke it, effectively making it irrevocable. However, this is not a simple switch—the tax and legal consequences must be carefully analyzed. Converting a revocable trust to irrevocable may be treated as creating a new trust for tax purposes and could trigger gift tax implications.
Can an irrevocable trust ever be changed?
Michigan law allows limited modifications to irrevocable trusts through court approval, consent of all beneficiaries, decanting to a new trust, or nonjudicial settlement agreements. However, any modification that changes beneficial interests may trigger gift, estate, or income tax consequences. Irrevocable trusts should be drafted carefully from the start because changes are difficult and potentially costly.
Does a revocable living trust save on estate taxes?
By itself, a revocable living trust does not reduce estate taxes. Assets in a revocable trust remain part of your taxable estate for federal estate tax purposes. However, revocable trusts can include provisions—such as marital trusts and credit shelter trusts—that help married couples maximize their combined exemptions and minimize estate taxes on larger estates.
Do I need court approval to set up a family trust in Metro Detroit?
No. Most revocable and irrevocable family trusts are created privately without court involvement. You do not need permission from any probate court to establish a trust. The court becomes involved mainly in special circumstances—such as trust disputes, protective trusts for minors or incapacitated adults, or voluntary trust registration.
Are distributions from an irrevocable trust taxable to beneficiaries?
It depends on the type of distribution. Income distributed from an irrevocable trust is generally taxable to the beneficiaries who receive it. Distributions of trust principal are typically not taxable as income to beneficiaries, though basis and capital gains rules may apply when appreciated assets are involved. Each trust’s tax treatment depends on its specific terms and the nature of the assets distributed.
Create the Right Trust Structure for Your Family
Choosing between revocable and irrevocable trusts is not a one-size-fits-all decision. The right choice depends on your net worth, family circumstances, goals for asset protection, and tolerance for complexity. Many Metro Detroit families benefit from using both types of trusts as part of a comprehensive estate plan.
At Boroja, Bernier & Associates, our estate planning attorneys help families throughout Michigan create trust structures tailored to their specific needs. Whether you need a straightforward revocable living trust for probate avoidance or a more sophisticated plan involving irrevocable trusts for tax and asset protection, we provide the guidance you need to make informed decisions. With our main office in Shelby Township and satellite offices in Troy, Ann Arbor, and Lansing, we serve families in Metro Detroit and across the state.
To schedule a consultation with the Michigan estate planning attorneys at Boroja, Bernier & Associates, call our law offices at (586) 991-7611. We will evaluate your situation and help you build a plan that protects your family and your legacy.
