Trusts are not just for the wealthy. They have benefits for the average person, and don’t need to be expensive to set up and maintain. Read on to learn more about creating a trust in New York.

What Is A Trust?

Trusts are vital estate planning tools that individuals and families can utilize in various ways to plan for the future and safeguard their assets. A trust is legally established when you sign an agreement transferring assets, such as real property or financial assets, to the trust. 

Why is A Trust A Good Estate Planning Option?

Trusts are an increasingly popular method of estate planning as they often offer more flexibility and potential tax benefits than wills. Trusts can also avoid probate and protect assets from the costs of long-term nursing care.

How Do Trusts Work?

Trusts can be revocable or irrevocable depending on the purpose of the trust. The trust can be designed in a way that allows the person creating the trust to have full use of the assets or property while alive, and the ability to designate what should happen with them when the person passes away.

How Is A Will Different Than A Trust?

A will is a legal document in which a person identifies how their assets will be distributed upon death. By contrast, a trust is a fiduciary arrangement whereby a grantor gives a trustee the right to hold and manage assets for the benefit of a specific purpose or person. Wills take effect after you die, while trusts can take care of your assets while you’re still alive. There are many other differences, and your Long Island estate planning attorney can help you understand why these differences are important.

What’s The Difference Between Revocable And Irrevocable Trusts?

Trusts generally fall into two categories, revocable and irrevocable. As the name suggests, in a revocable trust, the person creating the trust can amend or revoke it at any time to take back some or all of the assets, or update how the assets will be transferred upon their death. An irrevocable trust cannot be revoked by the person who creates it, but it still may allow for certain changes, depending on the purpose of the trust. Creating a revocable or irrevocable trust can have tax consequences, so make sure you are properly advised. 

What Is The Role Of A Trustee?

A trustee has two primary roles. First, the trustee is responsible for administering your estate, generally meaning that they carry out your wishes and divide the estate between your beneficiaries as designated in your trust. Second, if you wish to have assets managed on an ongoing basis through what’s referred to as a testamentary trust, then the trustee is responsible for managing and investing trust assets and making determinations regarding beneficiary distributions. 

How Do I Choose A Trustee For My Trust?

Trustees are fiduciaries. This means that they are entrusted with property and assets for the benefit of another. Legally, trustees carry a high legal burden, so it’s important you choose the right one. A good way to start is to think about individuals or financial institutions whom you trust and believe would follow the trust’s wishes. Characteristics that should be taken into consideration are trustworthiness, financial acumen, availability and impartiality. 

What Are Some Other Special Types of Trusts?

Other special types of trusts include the following: 

• Special Needs Trusts – A special needs trust or SNT 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. 
• Charitable Trusts – Charitable trusts are set up to provide support to charitable organizations. These trusts can provide significant tax breaks for donors, including income tax deductions and reduced tax burdens. Donors can specify how the charity is to use the funds, such as for medical research or educational purposes. 
• Beneficiary Protection Trusts – A beneficiary protection trust is one of the most popular trusts used today. These trusts allow you to retain some control if you want to protect your children from the potential negative consequences of future divorces, creditors, and bankruptcy.  

Is There Any Way To Contest A Trust?

A trust can be contested just like a will. In the state of New York, a trust contest may be successful if the trust maker was mentally incompetent, forced, unduly influenced, or deceived when establishing the trust.

Can A Trust Override A Will?

A trust can override a will in certain situations. For example, if you transfer your tiara into your living trust, technically, the trust becomes the owner of the tiara. So, if your will leaves the tiara to your granddaughter, but your trust names your niece as the beneficiary of the tiara, your niece would get the tiara. 

Is There An Advantage To Using A Trust Instead Of A Will?

The primary advantage of using a trust is that it helps you avoid probate, the court process that oversees the transfer of your property and the payment of any debts after your death. The probate process can be expensive and time-consuming for your loved ones. There are some other advantages to a trust as well. They include:

• Privacy – A will becomes public after the property owner dies, but a trust stays private. Only the beneficiaries and the trustee are informed of the trust and its contents.
• Flexibility – If you have complicated relationships or complex estate planning needs, a trust can be more flexible than a will. 
• Timed distributions – Through a trust, property doesn’t have to be transferred all at once, and can be transferred over time. A parent could set up a trust to take care of the bills of an adult child with special needs rather than giving their child a lump payment. Similarly, a trust can provide for monthly or yearly payments if children are not mature enough to handle their own money. 

Let Davidow, Davidow, Siegel & Stern, LLP Help

It’s time to get your estate in order! Here at Davidow, Davidow, Siegel & Stern, we can help you create or modify your estate plan to meet your and your family’s needs. Don’t hesitate to contact us today.