New York Trusts
A comprehensive estate plan may include more than a last will and testament. It may include a variety of tools, including a trust. While you may not be as familiar with the function of a trust and how it is may help you meet your estate planning goals, trusts do provide benefits that may be consistent with your overall goals. 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. It is managed by a trustee. The trustee makes decisions as to how to manage the trust assets to benefit the beneficiaries that you designate, consistent with the terms of the trust agreement. As you consider your overall estate planning needs it would be wise to consult an experienced New York trust lawyer who will be able to educate you on the benefits of a trust as well as the benefits of other estate planning tools in helping you reach your goals.Probate avoidance
An attractive feature of a trust is that a trust is not required to go through probate. Thus, your beneficiaries will be able to gain access to the trust assets more quickly than if the assets were transferred 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. When you pass away the executor who you name in your will alerts the Surrogate's Court and files your will. The first job of the court is to review the will to determine whether or not the will 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 any that appears to be improper, then
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. Estate 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. Once the creditors are paid, the executor will distribute the remaining assets to your beneficiaries according to the terms of your will.
As an experienced New York trust lawyer will explain, the steps in the probate process can take weeks, months and in some 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.
Living trusts v. testamentary trusts. A trust can be a living trust or a testamentary trust. A living trust is created and funded during your lifetime. If you choose to, with a living trust you are permitted to nominate yourself as the trustee and maintain control of the assets during your lifetime. The beneficiary of a living trust may receive the benefit of the assets in the trust while you are still living. On the other hand, a testamentary trust is funded and effective upon your death. The beneficiaries will not be entitled to the assets in the trust until after your death. Testamentary trusts are often created for minor children, relatives with disabilities, or others who may inherit a large sum of money that enters the estate upon the testator's death.
Revocable trusts vs. irrevocable trusts. A trust can be revocable or irrevocable. Revocable trusts, also referred to as living trusts, are very flexible in that they can be changed at any time. For example, if you would like to change the beneficiaries, add a successor trustee, or add assets, you can. If you want to dissolve the trust, you can do that as well. A revocable trust becomes irrevocable upon the death of the person who creates the trust. An irrevocable trust, on the other hand, cannot be changed or dissolved once it is created. As a New York trust lawyer will explain, you cannot remove assets, change beneficiaries, or change any of the terms of the trust. Irrevocable trusts have tax benefits that revocable trusts do not have based largely on the fact that one you create an irrevocable trust, you no longer have control over the assets. Examples of irrevocable trusts include:
- Bypass trust. A bypass trust is a trust created by married couples to reduce estate taxes when the second spouse dies. Upon the death of the first spouse, ownership of most of his or her property is transferred to the trust with the surviving spouse as the beneficiary. This allows the surviving spouse to have access to the trust property without ever owning it. As a result, when the surviving spouse dies, that property is not included in his or her estate, reducing the amount of estate taxes.
- QTIP trust or QDOT trust. A QTIP trust is a Qualified Terminable Interest Property trust. This type of trust is used by married couples to delay paying estate taxes until the second spouse dies. A QDOT is a Qualified Domestic Trust. It is similar to a QTIP trusts, but is used when one spouse is a noncitizen.
- 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.
- Life insurance trust. With a life insurance trust, instead of you owning the life insurance policy, the trust owns it. In other words you would transfer ownership of the life insurance policy to the trust. You, however, cannot be the trustee of the life insurance trust nor can you have any control over the policy once it is part of the trust. A life insurance trust reduces estate taxes by removing the proceeds of life insurance from your taxable estate. You can name anyone as the beneficiary of the policy.
- Grantor-retained interest trust. A grantor-retained interest trust is another estate planning tool that helps to reduce your estate taxes by removing property from your taxable estate. To set up a grantor-retained interest trust you would put property into an irrevocable trust and name the trust's beneficiaries. However, you will retain some interest in the trust for a set period of time. The interest in the property that you retain may be fixed annuity, variable annuity, trust income, or if the trust property is a home, for example, the right to live in that home. When that set time period that you retain an interest in the property has expired, your beneficiaries will then own the property outright. For tax purposes the IRS will value the gift at the time of the creation of the trust. If you do not outlive the terms of the trust, the purpose of the trust will have failed and no tax savings will be created.
- 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 another type of specialized 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, your or whoever is the trustee of the spendthrift trust would have the authority to
Because of the many different types of trusts that are available, it is a good idea to discuss your family's needs with a skilled trust attorney in New York who will be able to let you know the type of trust that will best help meet your estate planning goals given your personal situation. If your trust is not set up correctly, the goals of your trust may not be realized and the financial consequences may be severe.Contact the Law Offices of Stephen Bilkis & Associates
To ensure that your trust, will and other estate planning documents are properly drafted and executed, it is important for you to have experienced representation. The staff at the Law Offices of Stephen Bilkis & Associates will help you develop an overall estate plan that reflects your individual goals. Contact a skilled trust attorney serving New York at our office at 1-800-NY-NY-LAW (1-800-696-9529) a schedule a free, no obligation consultation regarding your case. We represent clients in the following locations: Queens, Manhattan, Bronx, Brooklyn, Suffolk County, Nassau County, Westchester County, Long Island, and Staten Island.