Benefits of Trusts | Wills vs. Trusts
Wills and trusts can both be components to your estate plan. However, the key to understanding trusts is to look at their added benefits, which include: keeping your estate out of probate after your death, delivering clear instructions should you become incapacitated, creating a continued source of income, gifting, protecting assets and
property, and improving eligibility for Medicaid.
In comparison, with a Will
alone, transfer of property requires going through the court system
(probate) to
validate and determine how property will be distributed. This process can
be costly. Putting a trust in place transfers your properties while
you are alive and avoids this time-consuming, costly process.
Learn more about how to avoid probate below.
Types of Trusts
There are many types of trusts to consider, for example: Revocable and Irrevocable Trusts, Living and Testamentary Trusts, Asset Protection Trusts, Income-Only Trusts, Supplemental Needs Trusts, Special Needs Trusts, Life Insurance Trusts, Qualified Personal Residence Trusts, Grantor Trusts and Charitable Trusts. New York
trusts attorneys Berwitz & DiTata LLP will work with you to determine
the type of trust that is best suited to achieving your financial
and personal goals. Creating the right trust(s) can help you to accomplish your estate planning, asset protection and privacy goals.
How Do I Avoid Probate? | Revocable Living Trusts Avoid Probate
A Revocable Living
Trust ("Living Trust") can be a "Will substitute" and can provide protection during your
lifetime and upon your death. During your life, you can be the Grantor
(owner), Trustee (manager) and Beneficiary (recipient) of the assets
that you transfer into the Trust. Most importantly, you have full use
of Trust assets and retain the ability to amend or revoke your Trust at
any time. If you are no longer willing or able to assume these
responsibilities, your appointed successor Trustee will take over. Upon
your death, the Trust assets are distributed to your designated
Beneficiaries.
A Living Trust not only achieves the same
objectives as a Will, but also protects you while you are alive. Like a
Will, it directs the distribution of your assets to take full advantage
of favorable estate and gift tax laws. Unlike a Will, it becomes
effective immediately and continues to exist after your death.
This
is important for two reasons: First, there is no need for probate as
your assets are owned by and distributed through your Living Trust.
Secondly, it delivers your instructions should you become incapacitated. The Trustee you select to manage your affairs is bound
by law to follow your instructions. A Living Trust can protect you from a
costly, time consuming and often humiliating guardianship
proceeding whereby a Court appoints a legal guardian to make personal and financial decisions on your behalf. Court costs and attorneys' fees
related to the guardianship proceeding are paid from your assets.
Irrevocable Living TrustsAn
Irrevocable Income-Only Trust, or Irrevocable Living Trust, is an
agreement between the Grantor(s), Trustee(s) and Beneficiary(ies).
While it can accomplish what a Revocable Living Trust does, it also is
a valuable tool for Medicaid planning. Properly drafted, an Irrevocable
Living Trust can provide a continued source of income for you, allow
you to become Medicaid eligible, and protect the assets in the Trust
against the costs of long-term care. In other words, you can qualify
for Medicaid benefits and protect your assets for later distribution to your
Beneficiaries.
This type of Trust has many other uses. For
instance, it can own life insurance (to be discussed below in the
section entitled "Life Insurance Trusts"), and can be used as a vehicle
through which to make gifts for the benefit of your children,
grandchildren, or other Beneficiaries. The assets placed in a Gift
Trust reduce your taxable estate and appreciate in value for your
Beneficiaries. The appreciation of these assets is not taxable to you.
Life Insurance Trusts An Irrevocable Life Insurance Trust is an effective method to exclude the proceeds of your life insurance policies from your taxable estate (as mentioned above under "Irrevocable Living Trust"). This type of Trust enjoys the benefits otherwise associated with the creation of any Trust, such as the avoidance of probate. It can also help to solve the problem of an estate that is "cash poor" (perhaps because it is not beneficial to liquidate investments in closely held businesses, real estate, or retirement funds) without adding value to the gross taxable estate. The laws which govern these types of Trusts are quite exacting and call for the expertise of a qualified estate planning professional.
Life Insurance Trusts, Grantor Trusts, Charitable Trusts, and Qualified Personal Residence Trusts (QPRTs)
These trusts are often used as part of your estate planning strategy to protect assets and limit estate tax liability. Download an article about Qualified Personal Residence Trusts (QPRTs)
New York Pet TrustsLearn about pet trusts and how you can protect's your pet's future here.
Supplemental Needs Trusts (SNT) and Special Needs TrustsThese Trusts are often used to assist individuals who are or may become disabled and require special needs and/or benefits. Supplemental Needs Trusts and Special Needs Trusts can help support the needs of a disabled individual. Learn more about special needs planning strategies, including how a Supplemental Needs Trust can help families.
Article: How Do I Select a Trustee download the article now
I'm considering establishing a trust, how do I select a trustee? Should this be a close friend? A family member? My children are grown, or will soon be, can I designate one of them? Can all of my children serve as trustees? Does my trustee need to have particulars qualifications?
Sometimes the initial consideration should be whether my trust is one that is expected to be fully administered and distributed shortly after my death or one that will continue for several generations. If the trust is designed to span generations, continuity and stability throughout the term of the trust might be an important consideration. In this event, the services of a corporate or institutional trustee may be beneficial. Often, however, where the trust permits the trustee to make discretionary distributions to beneficiaries, we recommend selecting someone whom you know and trust to serve as a trustee or co-trustee. The trust can even be structured to permit a trustee to later select a successor from among individuals who have not now matured. This will ensure the selection of the most capable successor trustee.
Many trusts, particularly living trusts, are designed to continue during the life of the "grantors" or creators and then, at their deaths, to distribute assets to children. Others might continue while the beneficiaries are minors. These trusts are not really intended to span generations. A trusted friend or family member can certainly serve as trustee.
The trustee that you select should be willing to serve in that role. The trustee will have the responsibility to exercise care and judgment in carrying out your wishes. He or she need not have legal expertise or training as counsel can be retained to explain the legal terms and assist in the administration of the trust, but the trustee must be older than eighteen, financially responsible and have common sense and sound decision-making qualities.
You may appoint more than one trustee but appointing more than two co-trustees is not generally advisable as it may lead to complications and disputes. If a child will be appointed, consider whether this will cause hard feelings among siblings. If your wishes are clearly set forth in the trust document and little if anything is left to the trustee's discretion, arguments can be minimized.
Seasoned Long Island Wills and Trust Attorneys | Trusts Estates
Call Long Island, New
York wills and trusts attorneys Berwitz & DiTata LLP at 516-747-3200 to identify
and implement a trust that fits with your estate planning goals.
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