One of our New York estate planning attorneys, Bonnie Kraham, Esq., recently authored an article that shares information on the increasing use of trusts in the estate plan of many local middle class families. The story was published in this weekend’s Times Herald-Record, and explains the various types of trusts that residents can use and the way that each holds and transfers property. Unfortunately, there remains a misconception among some local community members that creating a New York trust is a project only for the wealthy. That is not the case. As attorney Kraham notes, there has been a “living trust revolution” over the past few decades where many middle class families have discovered the ways in which these legal entities can be used to avoid probate, save taxes, and protect assets.
All trusts begin with a written agreement, and each includes at least three necessary parties. These include a “grantor” who creates the trust, “trustee” who manages the assets, and “beneficiaries” who use the trust assets. For example, the three roles may be filled when a senior couple creates a trust (grantors) to be managed by their lawyer (trustee) to provide for the couple’s children (beneficiaries). The three roles need not be filled by different individuals, however. Often a grantor will also act as beneficiary, so that they can still use those assets while they are alive. Following the written agreement which establishes the trust, assets are transferred into the entity by way of “retitling.” This involves changing the name on accounts, mutual funds, and stock certificates to the name of the trust, and transferring title to property to the trust.
The two main types of trusts are testamentary and living. Testamentary trusts are created only after an individual’s death pursuant to their will, while living trusts are created while a grantor is still alive. Living trusts are an increasingly common way for many families to transfer assets at death. Among other benefits, a living trust can help families avoid probate, saving time and expense in closing the estate.
Usually these trusts are revocable, meaning that they can be dissolved at any time. However, a few special types of trusts are irrevocable. For example, when a local family wants to protect assets from future nursing home costs they may create a New York Medicaid Asset Protection Trust. These irrevocable trusts have special rules that apply to how trust property can be used and transferred. Some legislative changes have recently been proposed which may limit the effectiveness of these special trusts to save assets from long-term care costs. Therefore, it remains ever important to consult an experienced elder law estate planning attorney to understand what options are available and prudent in your particular case.
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