What should I know about trusts?
On behalf of Michael Esslie
A trust can avoid probate, lower taxes, and help minor children in the event of a family tragedy. FAQs on trusts, answered.
Trusts as estate planning tools are still widely misunderstood. Despite common misconceptions, however, trusts are useful and flexible legal tools useful to a variety of people of all ages and income brackets. A trust is often a good way to accomplish all of the goals of an estate plan while reducing or eliminating the need for probate. It can also help you to protect an inheritance from being used in ways you don't intend.
Why should I consider a trust?
Trusts are not just for the extremely wealthy. Families of more modest means can still benefit from a trust. For example, a trust can preserve Medicaid eligibility for a special needs child while still allowing quality of life purchases (called a special needs trust). A trust can also help preserve assets for heirs and beneficiaries in the event you need long-term care. And, of course, trusts can also be used to minimize the New York state and federal estate taxes. These are just a few examples; numerous types of trusts exist, and which one is appropriate for your situation depends greatly on your goals and individual circumstances.
Most importantly, working with an attorney to set up a trust is not as difficult or expensive as you might think.
If I need a trust, what are my options?
A trust can be either a living or testamentary. Living trusts are established during a person's lifetime, and can be revocable or irrevocable. In an irrevocable trust, the assets in the trust are gifted, permanently, to the beneficiaries, and can't be changed. A revocable trust, on the other hand, you can change at any time, even removing assets if you need the money in the trust. So why would anyone choose an irrevocable trust? It depends on your needs. If you want to reduce estate taxes or qualify for Medicaid sometime in the future, then an irrevocable trust might be appropriate.
A testamentary trust is a trust that begins after death. It is usually set up in accordance with a will. Such a will takes the assets of an estate and uses a trust to disburse those assets. This arrangement is good for parents of minor children. While you are likely - quite understandably - to expect to live a long and healthy life, a trust can provide the security of knowing the assets you are working hard to accumulate will go towards useful purposes in the event of a tragedy. Under New York law, minor children inherit their parents' money outright when they turn 18. A trust can allow children to mature before inheriting the money.
Is a trust complicated to make?
With the help of an experienced estate planning attorney, a trust is no more difficult to create than a will. It is true, however, that a trust must be drafted carefully to follow New York law and the wishes of the person creating the trust.
How do I get started?
A trust can be as unique as your individual circumstances. That means a trust should be tailored to your needs, goals and assets. It is therefore important to speak to an experienced estate planning attorney to discuss the need to create or update an estate plan.
At Esslie & Frenia, P.C., our attorneys have years of experience helping parents, grandparents and families prepare for the transfer of assets with minimum tax burden, family controversy, and with the client's goals in mind. Contact our office to discuss the benefits of a trust for your situation.
Keywords: Estate planning, trusts, revocable trusts, irrevocable trusts, testamentary trusts.
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