One of the biggest misconceptions about general estate planning is that a “trust” is something that only rich families need to consider. This perception likely arises from colloquial use of “trust funds” to signify wealthy individuals who are living off substantial earnings preserved for them in a trust.
A better understanding of the legal tool takes away much of the mystique. The bottom line is that trusts are for everyone, serving as an incredibly useful option for middle class New Yorkers to protect assets accumulated over a lifetime for themselves and their loved ones.
So what exactly is a trust? In simple terms, it is a separate legal entity that you “create” by drafting formal documents. This entity then “holds” assets, and you can designate many details about the use, distribution, and management of those assets in the trust. There are different tax and creditor protection benefits that this separation allows. Various types of trusts exist, each with their own rules about how they operate and whether they can be changed. An estate planning attorney can explain exactly what trusts are right for you and how they work.
So do you need a trust?
Because of the widespread benefits, virtually all New York families can derive value from the use of trusts. A Fox Business article on the subjects lists a wide-range of situations where a trust is crucial. Some of the most apt include:
1) When you have a blended family. Trusts allow much more flexibility to provide for the needs of spouses and children who themselves are not related. Assets can be protected for children while still supporting a spouse without the potential for conflict down the road.
2) When you want to pass on assets automatically. Probate is a costly, stressful, time-consuming process. Trusts do not operate like Wills; they can work without the need for specific court direction.
3) When you worry about creditors. Because a trust is a separate legal entity, creditors are not always able to just take assets inside the trust when they are owed. For those with children or other loved ones who may be in debt, a trust is a great tool to pass on assets without worrying about them immediately being snatched away by others.
4) When you may need long-term senior care. A Medicaid Asset Protection Trust (MAPT) is just one of many special trusts which can provide very specific protections for likely events in the future.
If you live anywhere in New York, please consider contacting our experienced team of estate planning attorneys to learn more and see how you can take advantage of a legal trust.