Does a Michigan Living Trust Protect Your Assets From Creditors After You Die?

A revocable living trust is one of the most useful tools in Michigan estate planning. For the assets you properly transfer to it or direct into it, it can avoid probate; it generally avoids the public probate filing of the trust’s dispositive terms; and it stays fully under your control while you are alive. Because of all that, a lot of people assume a living trust also does one more thing: puts their assets out of reach of anyone they might owe money to.

On July 20, 2026, the Michigan Supreme Court addressed that assumption directly. In In re Fowler Estate; In re Fowler Trust (Michigan Supreme Court Docket Nos. 167501-167503, decided July 20, 2026), the Court held that after you die, the assets in your revocable living trust are generally available to pay your debts, the same as if the property had passed through your will. A living trust is a probate-avoidance and control tool, not a shield from your own creditors. At the same time, the Court confirmed that a few specific assets keep the special protection the law already gives them, even when they flow into a trust. Two of the most common assets Michigan families own, retirement accounts and life insurance, fall into that protected group.

The common misunderstanding about living trusts

People often hear “trust” and picture a wall around their money. That picture fits some trusts. Some irrevocable trusts can provide creditor protection, but irrevocability alone is not enough. The result depends on who created and funded the trust, what rights the person retained, when the transfers occurred, and whether the arrangement complies with fraudulent-transfer law, the rules that let a court undo transfers made to put assets out of a creditor’s reach, and other applicable laws. A revocable living trust is different. You keep the right to change it, add to it, or cancel it entirely at any time. Because you never give up control, the law treats the property inside a revocable trust as still effectively yours, and that includes for the benefit of the people you owe.

This distinction matters both during life and after death. While you are alive, property in your revocable trust generally remains subject to your creditors. Fowler addressed how that principle operates after death, when the probate estate cannot satisfy its obligations.

What happened in the Fowler case

The case arose from a wrongful-death claim. The estate of Helen Fowler obtained a court judgment against the estate of Jennifer Fowler. Jennifer’s probate estate could not pay the judgment; its assets had been used up on funeral costs and the defense of the lawsuit, leaving it insolvent.

Jennifer, however, had a revocable living trust, and that trust was named as the beneficiary of both her 401(k) retirement account and her life insurance policy. When she died, those proceeds were paid into the trust. Helen’s estate, as a judgment creditor, argued that it should be able to reach that money to satisfy the judgment. The trustee argued the proceeds were protected. The question went up to the Michigan Supreme Court.

What the Michigan Supreme Court decided

The starting point, the Court explained, is that a revocable trust does not put assets beyond a deceased person’s creditors. Under MCL 700.7605(1), the property of a trust that was revocable by the person at the time of death, including assets paid into the trust when they die, can be used to pay the estate’s obligations. That applies to the extent the probate estate itself is not enough to cover them. Those obligations include administration expenses, valid creditor claims that are filed on time, and the statutory allowances Michigan sets aside for the family, unless an exemption applies.

A one-person revocable trust becomes irrevocable the moment the person dies, but the Court held it is still treated as a revocable trust for this purpose. The Court invoked a longstanding rule of equity, that a person “must be just before he is permitted to be generous,” meaning debts are paid before gifts to heirs.

Accordingly, the trust property was generally available to satisfy the judgment to the extent Jennifer’s probate estate was insufficient, unless one of MCL 700.7605’s exemptions applied. Two of those exemptions decided this case.

Exemption one: retirement accounts

The first protected asset was the 401(k). MCL 700.7605(2) provides that a trust established as part of a qualifying retirement plan, such as a 401(k), is not the kind of trust that creditors can reach under the general rule. The Court held that payments coming out of such a plan carry that same protection with them. Because the 401(k) money was a payment from a qualifying retirement plan, it stayed exempt from creditor claims even after it landed in Jennifer’s living trust.

Exemption two: life insurance

The second protected asset was the life insurance. MCL 700.7605(4) shields property that would not have been subject to a claim against the person’s estate if it had simply been paid to a named beneficiary instead of the trust. Michigan law has long protected life insurance proceeds paid to a named beneficiary from the insured person’s creditors. The Court reasoned that because the proceeds would have been protected if Jennifer had named a person as beneficiary, they do not lose that protection just because she named her trust instead. The life insurance proceeds were therefore also exempt.

The Court reversed the Court of Appeals and remanded the case, holding that both the retirement and life insurance proceeds were beyond the reach of the judgment creditor. The broader point, though, is the one every family should take away: those assets were protected because the law gives them their own special exemption, not because they were sitting inside a living trust.

What this means for Michigan families

A revocable living trust remains an excellent tool for what it is designed to do. It avoids probate for the assets you fund into it, generally keeps the trust’s terms out of the public probate record, provides a smooth transition if you become incapacitated, and lets you spell out exactly how and when your loved ones receive what you leave them. None of that changed. The Fowler decision simply confirms the boundary of what a living trust does.

If your goal is to keep money away from your own creditors after death, a revocable living trust is not the tool for that job, and building an estate plan on that mistaken belief can leave your family exposed. The assets that came through protected in Fowler, the retirement plan payment and the life insurance, were protected by their own statutory exemptions and by how they were structured, not by the trust itself. The practical lesson is that how you title accounts and designate beneficiaries can matter as much as the trust document. Those choices also carry their own income-tax, ERISA (the federal law governing employer retirement plans), spousal-rights, and distribution-timing consequences, so they are worth reviewing alongside the trust rather than in isolation.

If you already have a living trust, or you are considering one, it is worth reviewing how your retirement accounts and life insurance are set up alongside it, so the protections the law offers are actually preserved rather than accidentally given away. This coordination is a core part of estate planning, and it is closely related to the way business owners plan for what happens to an LLC when the owner dies.

Talk to a Michigan estate planning attorney

If you assumed a living trust would keep your assets away from creditors after death, Fowler is a reason to have your plan reviewed. The Law Offices of Maynard F. Newman helps Grand Blanc and mid-Michigan families set up wills, revocable living trusts, powers of attorney, and business succession plans, and coordinate them with how retirement accounts and life insurance are titled. Contact the firm to schedule a consultation.

Frequently Asked Questions

Does a revocable living trust protect my assets from creditors?

Not from your own creditors. During your life, property in a revocable trust generally remains reachable by your creditors, and after death, Fowler confirmed that trust property is available to pay your debts to the extent your probate estate cannot (MCL 700.7605(1)). A living trust is designed to avoid probate and keep control in your hands, not to shield assets from people you owe.

Are life insurance and retirement-plan proceeds protected from the deceased owner's creditors in Michigan?

Certain proceeds can be. In Fowler, the Michigan Supreme Court held that a payment from the decedent's qualifying 401(k) plan and life insurance proceeds payable to her revocable trust were exempt from the claims asserted against her insolvent estate. The result may differ with another type of account, a different beneficiary designation, fraudulent transfers or premium payments, bankruptcy, or claims against the recipient rather than the deceased owner.

What is the difference between a revocable and an irrevocable trust for creditor protection?

A revocable trust leaves you in full control, so the law treats the assets as still effectively yours and reachable by your creditors. Some irrevocable trusts can offer creditor protection, but irrevocability alone is not enough; the result depends on who created and funded the trust, what rights were retained, the timing of the transfers, and compliance with fraudulent-transfer and other laws. Which structure fits depends on your goals and is worth discussing with an attorney.

Please note: This article is provided for general educational and informational purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship between you and the Law Offices of Maynard F. Newman, P.L.L.C. Michigan law changes and every situation is different; you should consult a qualified Michigan attorney before relying on anything described here. This content may also be considered attorney advertising.

Primary source: In re Fowler Estate; In re Fowler Trust (Brooks v. Estate of Helen Fowler), Michigan Supreme Court Docket Nos. 167501-167503, decided July 20, 2026 (unanimous opinion by Justice Thomas). Governing statutes: Michigan Trust Code, MCL 700.7605 and MCL 700.7506. Read the opinion on CourtListener.