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Brooklyn Trust Administration
A trust is a legal arrangement to which you transfer your property. The property is held in the trust by a trustee for the benefit of the beneficiaries of your choosing. While a trust is different from a will in that a trust avoids probate, like a will trusts do require administration. The person who is charged with the responsibility of administering your trust is the trustee. In administering a trust, the trustee must strictly follow the instructions contained in the trust agreement. For example, the trust document will specify who the beneficiaries are and how the assets in the trust are to be spent for the benefit of those beneficiaries. Other administrative duties may include maintaining accurate records, paying taxes, investing trust funds, and making distributions to or on behalf of trust beneficiaries. While a trust is an important estate planning document that may help you achieve your estate planning goals, it is also a complicated document. If you are contemplating creating a trust or if you have been charged with administering a trust, contact a Brooklyn Trust Administration Lawyer who will explain to you how a trust works and who will also answer other challenging questions regarding estate planning.
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Like a will with a trust you can leave assets to your loved ones. However, unlike a will, a trust that you set up prior to your death does not have to go through probate. Probate is the legal process through which the executor of an estate winds up the affairs of a deceased person and distributes that person's assets according to the instructions left in a will. Probate often can delay the distribution of estate assets for weeks, months, and even years, potentially causing beneficiaries financial hardship. A trust allows for the relatively speedy distribution of trust property to the beneficiaries you designate. Because of the costs associated with probate that are paid from estate assets, with a will the value of estate assets available for beneficiaries is often significantly diminished. Furthermore, the trust administration process is more private than the probate administration process. Once a will is submitted to the New York Surrogate's Court for probate it becomes public record. This means that anyone can search public records and find out the contents of the will, including the size of your estate and how much each beneficiary is to receive. Since trusts do not go through probate they are not open to public scrutiny.
However, even if you have a trust it is wise to also have a will. Any property that you own at the time of your death that has not been transferred to your living will will be part of your probate estate. This means that in the absence of a will that property will be subject to the rules of intestate succession. It will go to your heirs as defined by New York law, regardless of your wishes.What are the responsibilities of the trustee?
When you create a living trust the trustee has responsibilities both during your lifetime and after your death. Trustee's pre-death administrative responsibilities include managing the trust property, preserving trust property, and filing tax returns. The nature and extent of the trustee's post-death administrative duties depends on several factors including the type of trust, the number of beneficiaries, the ages of the beneficiaries, the type of property held by the trust and when the property of the trust must be distributed to the beneficiaries. Examples of the trustee's duties include:
- Collect and appraise trust property
- Respond to claims against the estate, and pursue claims for the estate
- Pay creditors
- Make distributions according to the terms of the trust agreement
- Hire professionals such as an attorney, accountant or investment advisor
- File tax returns, such as federal and state income tax returns
There are several different types of trusts established to accomplish different goals. Trusts can be inter vivos or testamentary. A trust can be revocable or irrevocable. A revocable trust can be changed, while an irrevocable trust cannot be changed. Examples of types of trusts include:
- Educational trust. If you want to put aside money for someone's educational expenses, you can do that with an educational trust. The beneficiary of the trust can be your child, your grandchild, or any other person that you name. The property in an educational trust is earmarked specifically for educational expenses. The terms of the trust will specify the conditions under which the funds can be used. For example, the trust funds may only be used to pay for 4 years of college tuition. Or the beneficiary may be required to maintain a certain grade point average to continue to receive funds from the trust. In administering the trust the trustee would disburse the funds to pay for appropriate educational expenses.
- Minor child trust. A common type of trust is a minor child trust. Suppose, for example, that you have a 5-year old child. If you want to set aside money for your child, you can do so using a minor child trust. While your child will be the beneficiary of the trust assets, the child will not be able to access the funds or have control over the funds until the child becomes an adult. The role of the trustee in administering a trust for a minor child is to determine how the funds can be used to benefit the minor based on the terms of the trust. For example, the trust may provide that the funds are to be used for the minor's health, welfare and education. So, paying for the child's private school tuition would be appropriate. The trust can be set up so that once the minor reaches majority, the trustee transfers trust property to the beneficiary.
- Spendthrift trust. A spendthrift trust is designed to protect the assets of a beneficiary who is not able to properly manage his or her own affairs. A spendthrift trust is different from a minor child trust. The beneficiary of a spendthrift trust is not a minor, but typically someone who is mentally incompetent or someone who has a history of making questionable decisions with finances. In administering this type of trust the trustee may be responsible for paying the beneficiary's bills or making large purchases such as buying a car or real estate. However, the beneficiary's creditors are unable to access the trust property. The trustee may also distribute the funds to the beneficiary in regular intervals in the form of an allowance.
- Special needs trust. A special needs trust is set up to support a beneficiary who has a disability. Assets can be used to cover a variety of expenses such as medical expenses, rehabilitation, special equipment, training, companions, recreation, insurance, and quality of life enhancing expenses. The feature that distinguishes a special needs trust from other types of trust is that they are designed to protect the beneficiary's eligibility for governmental benefits such as Supplemental Security Income and Medicaid, while at the same time leaving the beneficiary property. It is up to the trustee to administer the trust so that only eligible expenses are paid out of trust funds.
Setting up a trust can be quite complicated. Setting up a trust incorrectly can result in the goals of the trust not being reached as well as significant financial and tax consequences. If you are considering setting up a trust, need guidance on how to administer a trust or have concerns about how your trust is being administered, contact Stephen Bilkis & Associates, PLLC. Our staff has years of experience working closely with trustors, trustees, beneficiaries and the New York Surrogate's Court on issues related to establishing and administering trusts. Contact us at 800.696.9529 to schedule a free, no obligation consultation regarding your estate plan.