Common Trusts in New York

A trust is a document giving you, another person, or an institution the power to hold and manage your money or assets for your benefit or the benefit of another person. A trust can serve many purposes. If you live in the state of New York, there are many different types of trusts you can create, each with a different objective.

Many people are generally familiar with revocable and irrevocable trusts. A revocable trust allows you to transfer your assets to a trust while still maintaining complete control over them. This type of trust can be freely amended, modified, or revoked by you during your lifetime. At death, the assets will pass to the named beneficiaries of the trust.

A revocable trust is typically used to avoid probate, which is the court process of “proving” a will, which can lead to months of delays after your death. A revocable trust can be especially helpful if there are beneficiaries who may contest a will or other possible inheritance disputes. 

It is important to note, however, that a revocable trust offers no asset protection. For that, you need an irrevocable trust. If your assets are properly put into an irrevocable trust, you will be entitled to Medicare benefits, including nursing home care, home care, and possibly assisted living programs. By planning ahead with an irrevocable trust, you can ensure that you will qualify when you submit a Medicaid application without spending down your family’s assets.

Other relatively common trusts include special needs trusts and charitable trusts.

• Special Needs Trusts – A special needs trust is designed to provide for the continuing care of a person with special needs without disruption of government entitlement benefits, such as Supplemental Security Income and Medicaid. Trust assets may be used to provide for items or services not covered by governmental benefits, such as home and automobile modifications and specialized computer equipment. Funds in a special needs trust enhance the benefits provided by governmental programs. 
• Charitable Trusts – Establishing a charitable trust can have many benefits, both for the person creating the trust and for the charitable organizations that the trust benefits. Charitable trusts can provide significant tax breaks for donors, including income tax deductions and reduced tax burdens. Another key advantage of establishing a charitable trust in New York State is the ability to direct the use of charitable donations. Donors can specify how the charity is to use the funds, such as for medical research or educational purposes. There are several types of charitable trusts, including charitable lead trusts and charitable remainder annuity trusts, so be sure you consult with a knowledgeable Long Island trust attorney with expertise in charitable trusts.
• Beneficiary Protection Trusts – A beneficiary protection trust is one of the most popular trusts used today. These trusts are useful if you’ve worked hard and have done everything you can to save assets for your kids, but at the end of the day, you’re concerned that your kids are likely to find a way to lose them. With 53% of marriages ending in divorce, it’s not hard to imagine this statistic could include your children. So, what will happen if they inherit your money and, right away, buy a bigger house with their spouse and three years later they divorce?  Since they own the house together, your kid’s ex-spouse is likely to get half the value of the house. Another thing to consider is what will happen if your child predeceases your daughter or son-in-law and they remarry. You may be very concerned about making sure that your hard-earned money passes to your grandchildren. If you want to retain some control as to where the money goes after you’re gone, and you want to protect your kids from the potential negative consequences of future divorces, creditors and bankruptcy, you can create a beneficiary protection trust.  
• Trusts to Protect Children From Their Parents’ Second Marriage – Second marriages create a unique set of challenges that can be very difficult and awkward to handle. A good elder law plan will specifically address this situation.  You want to protect your spouse to make sure he or she will be able to maintain their lifestyle if you die first, but at the same time, you also want to protect your own kids. Understand that if your second spouse inherits your assets outright, you will have no control over what happens with the assets once you are dead and gone. In a second marriage, if there are children from the first marriage, a couple will have dual loyalties, and a good estate plan needs to offer a means to protect both sides equitably. One tool to accomplish this would be for each spouse to incorporate a trust into their plan for the benefit of the surviving spouse.   

Contact Davidow, Davidow, Siegel & Stern, LLP

Many people would benefit from establishing a trust, as trusts can meet a wide range of planning needs. A trust enhances your estate plan by not only avoiding the probate process but by also providing additional benefits, such as protecting assets from creditors, keeping assets from vulnerable beneficiaries, reducing estate taxes, setting aside funds for charity, and more. 

We have over 100 years of experience helping people with estate planning, and we can help you determine whether a trust is in the best interest of you and your family. Contact the lawyers at Davidow, Davidow, Siegel & Stern, LLP today to help you prepare for your future.