and Your Family
When you decide to create an estate plan it is a good idea to consider not only creating a will but to also consider other types of estate planning documents such as a trust. While you may not be as familiar with trusts as you are with wills, a trust may be a valuable tool for meeting your planning goals. A trust is a legal entity that holds assets for the benefit of another person. The person who creates a trust is referred to as the settlor, trustor or grantor, while the person who manages it is called the trustee. The trustee makes decisions as to how to manage the trust assets to benefit the people you designate as the beneficiaries. The trust agreement includes terms that inform the trustee as to how to manage the trust. As you contemplate your estate planning needs and goals, consider consulting with an experienced Brooklyn Trust Lawyer who will be able to explain to how a trust works and the advantages of having both a will and a trust.
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When you create a trust you transfer assets of your choosing into the trust. The trust will then hold the assets for the benefit of the beneficiaries you choose. You can transfer practically any type of property to a trust including cash, stocks bonds, other securities, insurance policies, real estate, antiques, and artwork. The type of property that you choose to transfer to a trust depends on your goals.Probate Avoidance
An attractive feature of a trust is that unlike a will a trust is not required to go through probate. Probate can be long and quite costly, particularly if your estate is large or complicated. Thus, your beneficiaries will be able to gain access to the trust assets more quickly than if the assets were passed using a will. Furthermore, avoiding probate will likely reduce the amount of administrative fees, leaving more for your beneficiaries to enjoy.
Probate is the legal process during which the New York Surrogate's Court validates your will and authorizes the distribution of your assets. However, there are several steps that are involved in probate that must be completed before your asset can be distributed. When you pass away your executor will alert the Surrogate's Court and file your will. The first job of the court is to review the will to determine whether or not it is valid. The court will make sure that the will was executed in accordance with New York law. For example, the signing of the will must have been witnessed by a minimum of two people. NY EPTL § 3-2.1(a)(4). If the judge finds anything that appears to be improper, then the judge may decline to allow the will to be probated.
If the judge determines that the will is valid, then the executor may proceed with winding up your estate. The executor will first inventory your assets and determine your estate's value. This is important as it the executor must make sure that there are enough assets to pay creditors and to distribute to your beneficiaries. The executor must pay any debts of your estates prior to paying your beneficiaries. Estates debt will include fees and expenses associated with administering your estate, taxes, as well as money owed to other creditors that file a claim against the estate. If you pass away owing a significant amount of debt, it is possible that your beneficiaries will end up with very little from your estate. Once the creditors are paid, the executor will distribute the remaining assets to your beneficiaries according to the terms of your will.
Probate can take weeks, months and in extreme cases years. Delays may be caused by a variety of factors such as disagreements with creditors and probate litigation brought on by family members, beneficiaries and others.
With a trust, however, the property that is held in trust will not be held up by probate. Your beneficiaries will receive distribution of those assets relatively quickly after you pass away.Types of Trusts
There are several different types of trusts. The type of trust that you choose to set up depends on your goals. For example, you can set up a trust to provide for minor children or for elderly relatives. Some establish trusts for relatives who may need guidance in handling finances. A trust can also be set up to protect your assets should you become incapacitated.
There are several different types of trusts designed to accomplished different goals. Common types of trusts include:
- Charitable Trust. A charitable trust is designed to provide property to a charitable cause and at the same time reduce income and estate taxes. There are three types of charitable trusts: charitable remainder trusts, charitable lead trusts, and pooled income trusts.
- Generation-Skipping Trust. A generation-skipping trust provides a means to avoid estate taxes. Instead of leaving property to your children, the trust would be set up with your children's children as the beneficiaries. As a result, you would avoid the estate taxes that would apply if the assets were first transferred to your children.
- Special Needs Trust. A special needs trust (SNT) is typically established by parents to provide for a disabled child. The assets in a SNT can be used to cover necessities as well as quality-of-life items such as special therapies, medical insurance, education, and special equipment and vehicles including wheelchairs or accessible vehicles. SNTs can be designed to allow beneficiaries to remain eligible for government benefits such as Medicaid and Social Security Income despite the existence of a SNT.
- Spendthrift Trust. A spendthrift trust is designed to provide for someone who is not able to responsibly manage their finances. It could be that you have an adult relative who has a track record of mismanaging money and racking up debt. A spendthrift trust would provide you a tool to give that relative financial help without giving them control over the money or property that you give him or her. Instead, the trustee of the spendthrift trust will be in charge of managing the assets of the trust.
Because of the many different types of trusts that are available it is a good idea to discuss your family's needs with a Long Island Trust Lawyer who will be able to let you know the type of trust that will best help meet your goals given your personal situation. In addition, trusts are complicated to set up. If your trust is not set up correctly, the goals of your trust may not be realized and the financial and tax consequences may be severe. To ensure that your trust is properly drafted and executed it is important for you to have an experienced person draft it for you. The staff at Stephen Bilkis & Associates, PLLC will not only help you create a trust, we will also work closely with you to develop an overall estate plan that reflects your individual goals. Contact us at 800.696.9529 to schedule a free, no obligation consultation regarding your estate plan.