Written by Haans Mulder, JD, MBA, MST, CFP®
There are many challenges to transitioning a family business to the next generation. One of the greatest is that your children will go through a divorce and will have to sell some of their ownership interest to split the assets in a divorce settlement. Fortunately, there is a new trust in Michigan that could mitigate this risk.
This new trust is commonly known as a “Domestic Asset Protection Trust” but, as I have reviewed the Michigan statute, I think it could be equally known as a “Divorce Protection Trust.” The purpose of this trust is to protect the assets from creditors or in this case, having to be split in a divorce. In contrast to other trust structures that have been in existence in Michigan, this Divorce Protection Trust has express statutory protection in a divorce proceeding. It other words, the assets in the trust (i.e. the family business) are protected from being split in a divorce. You as parents or your child can create this trust as a part of your family business succession plan. If you create the trust and transfer the family business interest to that trust for the benefit of that child, it doesn’t matter if the child is already married. However, if the child creates the trust and has already received an ownership interest in the family business, the business interest is protected “only” if this trust was established and the family business ownership interest was in the trust “before” the child was married. So, being proactive and setting up a Divorce Protection Trust as early as possible will help to protect the family business.
If you or your children have an interest in learning about this type of trust to protect your family business, feel free to contact me.

Haans Mulder, JD, MBA, MST, CFP® Partner, Cunningham Dalman, P.C. PHMulder@cunninghamdalman.com
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