August 24, 2026

If you have a retirement account or life insurance policy payable to a trust, a recent Michigan Supreme Court decision now provides more protection. The Court ruled that creditors generally cannot reach 401(k) and life insurance proceeds held in a trust after the account owner's death.

The Case

In In re Estate of Jennifer Fowler (Michigan Supreme Court No. 167501, decided July 20, 2026), the Court reversed in part a Michigan Court of Appeals ruling that had allowed a deceased person's retirement account and life insurance proceeds to be used to pay a judgment against the estate.

What the Court Decided

As a general rule, once a trust becomes irrevocable at the settlor's death, its assets — including assets added to the trust after death — can be reached by creditor claims. But the Supreme Court found two important exceptions apply here, both rooted in MCL 700.7605:

  • 401(k) proceeds are protected because they qualify as a “payment from” a qualifying retirement plan under MCL 700.7605(2).
  • Life insurance proceeds are protected under MCL 700.7605(4) because they would not have been subject to creditor claims if they had been paid to a beneficiary other than the settlor's estate.

Why It Matters

This decision gives a clearer, stronger legal footing to protect certain trust assets from creditors. It confirms that retirement accounts and life insurance proceeds can retain their protected status even when they are directed into a trust, offering meaningful peace of mind for anyone using a trust as part of their estate plan.

Categories: Articles, Estate Administration & Probate