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When are living trusts a bad idea?

Many people are recommended to start living trusts when they begin planning their estate. Living trusts can be beneficial for many people who are looking to avoid losing high portions of their estate in the probate process and create a legacy for their loved ones. There are many benefits that come with starting a living trust, but before starting one, it is important to understand more about the wide variety of estate planning tools and strategies that are available to you.

Before starting a living trust, it is vital that you conduct adequate research and consider whether doing so is a lucrative and appropriate decision based on your specific financial and personal circumstances. The following blog will address what factors might indicate that setting up a living trust is not ideal for you.

You do not have a large estate

One of the most obvious benefits of setting up a living trust is the fact that it helps people to avoid the probate process. Going through probate can take a long time and it becomes very costly when a large estate is being processed. If you have a very large estate, it is worth investing time and money up front so that some of your largest assets can avoid the probate process by being put into a living trust. If you do not have a very large estate, spending this time and money may simply not be necessary.

You are married

Single people may find it beneficial to set up a living trust for a person that would not necessarily be a natural beneficiary. However, if you are married and want your spouse to inherit all assets, this will happen automatically and no action needs to be taken.

You are under the age of 55

Living trusts take effort and money to maintain. If you are under the age of 55 and you consider yourself to be healthy, it may be unnecessary to create a living trust so early on, and it might be something to consider in the years to come.

While living trusts may not be the best solution for everyone, there is an estate planning solution for every need. Therefore, it is wise to take action in planning your estate in the state of New York.

Advantages of a revocable living trust

Individuals in New York who are planning for the distribution of their property after they die may have heard of a revocable trust but be unfamiliar with what is involved in such a document. Another name for a revocable trust is a living trust, and as its name implies, it is created and takes effect while the grantor is still alive. The terms of an irrevocable living trust cannot be changed while those of a revocable trust can.

A revocable living trust can have two functions. It can both protect a grantor who subsequently becomes incapacitated, and it can also provide a vehicle for the distribution of the assets in the trust after the grantor’s death.

Like all trusts, a revocable trust is administered by a trustee , but the trustee can be the individual who creates the trust. However, it is also possible and in most cases advisable to appoint a co-trustee. One advantage of having a revocable living trust with an appointed co-trustee is that if the grantor does become incapacitated, rather than having a guardian appointed, the other trustee can manage the affairs of the trust.

Trust and estate administration can be complicated, and a person who is appointed as a trustee may feel overwhelmed. However, an attorney can often be of assistance whether the individual is administering the trust for a grantor who is still alive but unable to manage his or her affairs or after the grantor’s death. Those who are seeking the preservation and protection of their assets for future generations may wish to consult with an estate planning and administration attorney for advice on the types of documents that can best achieve that goal.

Coach distributes money to players using revocable trust

New York basketball fans may have heard about a former University of North Carolina basketball coach who left $200 to each of the approximately 180 players he coached during his career. The coach used a revocable trust to distribute the funds.

The distribution came to public attention because a number of the players mentioned the North Carolina coach’s payouts on social media, but normally, a revocable living trust provides privacy that a will does not. This type of trust has other advantages as well. The person who sets up the trust remains in control of it, allowing them to dissolve the trust at any time if they have a change of heart or a change in their assets.

A revocable trust does not eliminate the need for a will. Assets that do not go into the trust must still be distributed with a will, and in some cases, an individual may set up a special type of will known as a “pour-over” will, which deals with all the assets that were not moved into the trust.

Revocable trusts may be expensive to set up and administer, so anyone considering them as an option may wish to weigh the advantages and disadvantages. However, in the right circumstances, a revocable trust can serve as the main estate planning document. For example, because the probate process that accompanies a will might be more expensive for some types of estates, a trust may be a better choice. An individual who is prominent in the community may also want the privacy provided by a trust.

Establishing and administering a trust can be complex, and an individual who is considering doing so may wish to consult an attorney. An attorney may also be able to assist in correctly preparing a will and other estate planning documents.

Source: Bloomberg, ” Dean Smith’s Generosity Got Lots of Press. His Estate Plan Deserves Some Too ,” Suzanne Woolley, March 27, 2015

Trust administration in New York

When you are preparing your estate plan, you may want to consider utilizing trusts to help you meet a variety of different types of financial and family goals. If you plan and set up trusts appropriately, you can use them to directly pass your assets to your heirs while bypassing the expense and litigation that can be involved with the probate process.

If your estate is fairly large, you may want to establish a trust that may help your heirs avoid certain tax liabilities they might otherwise incur. You can establish trusts to meet most any need or goal, including trusts set up to benefit a disabled relative, trusts established for charitable purposes, revocable or irrevocable trusts and bypass trusts.

The type of trust you choose should be tailored to meet your individual estate needs and goals. If the trust is set up correctly, your family can avoid public scrutiny that can come along with the openness of probate court proceedings. You may have a disabled child that will need to continue meeting eligibility requirements for disability benefits, and with a trust, you can ensure his or her expenses are paid without affecting eligibility for government benefits.

Our firm has experience with skillfully setting up trusts for our clients in the manner most appropriate to meet their estate planning needs and goals. We often help clients understand the potential tax ramifications of different trusts and help them set up those that are most beneficial. The estate planning process and trust planning process can be extremely complicated, and we understand that most people have many questions about trusts and avoiding probate court. If you are interested in more information about establishing trusts, you are invited to review our trust administration page.

Estate planning errors to avoid

Individuals in New York who are estate planning should keep in mind that there are a number of common errors that people make with their wills, trusts and other documents and accounts. One of these errors is making an estate plan and failing to return to it for revisions. Such changes as children, marriages, deaths and divorces may result in a needed update, so estate plans should be periodically reviewed.

Individuals may also need to consider how they disburse funds among their children. Trusts can be set up to attach conditions to funds disbursed to special needs children, or individuals may find that they want their children to be of a certain age before they are able to access their trust fund. Individuals should also be careful about whom they have chosen to be trustee. Hiring someone may be better than appointing a family member who may be put in an uncomfortable position.

A will has to go through a potentially expensive and time-consuming probate process, so individuals may find that they are better off establishing a revocable trust. However, a revocable trust must be funded once it is established.

While focusing on wills and trusts, it is important to keep in mind that life insurance policies and other accounts that have beneficiaries are separate from the wills and trusts. These need to be kept current as well. Finally, individuals should avoid DIY estate planning due to the complexity of the process.

An attorney may be helpful in estate planning and ensure that documents requiring precise legal language are accurate and up-to-date. Furthermore, an attorney may also be able to assist an individual in making the right decisions regarding the use of trusts, wills and other aspects of estate planning.

Source: CNBC, ” Trust bust: Steer clear of the 8 biggest estate-planning mistakes “, Barry Glassman, January 03, 2015

Trusts and estate plans

While some people with very simple estates may not need to set up a trust, trusts can be a useful tool for many different people in New York who are in the process of estate planning. People who have a net worth of $100,000 and who have a sizable portion of assets held in real estate, art or business may benefit by using a trust.

Some people want to direct that their assets be provided at different times contingent upon the intended beneficiary completing something or reaching a certain age. Others want to ensure that after their spouse dies, their estates will then pass to their children and not the spouse’s heirs. Trusts are also beneficial for people who want to provide for a disabled relative without affecting his or her ability to receive disability payments and Medicaid.

Trusts allow people to avoid the costs and fees of probate . They also can be used to reduce estate and gift taxes and help to protect assets from lawsuits and creditors. People who set up trusts can also put conditions on the time of disbursement of assets as well as the manner in which they are distributed.

Trusts can be an important and beneficial tool to use when planning how to handle an estate. There are many different benefits to setting up a trust depending on the type of trust selected. They are very flexible and can be varied to meet the individual needs of the grantor and his or her intended beneficiaries. People should carefully think what they would like to achieve with their estate and discuss whether a trust is appropriate for them with their estate planning attorney. An attorney may be able to advise his or her clients regarding the type of trust that would best help them.

Source:  CNN Money, ” Estate planning: Is a trust beneficial? “, November 24, 2014

Charitable trusts in New York

Some people in New York might wish to set up a charitable trust so they can donate assets and income earned through it to various designated charities. It is important when people are wanting to set up a trust for this function that they do it in such a way as to avoid potential tax implications.

The IRS tax code provides that a charitable trust is not a charitable organization, and thus any income the trust makes is subject to excise taxes. Charitable organizations, on the other hand, are exempt from excise taxes. It is possible for a trust to receive designation as a charitable organization, however.

When a charitable trust donates all of its assets and income to various charities, the trust will not be considered charitable while the estate is administered and settled. Similarly, when a charitable trust seeks exemption from taxes as a charitable organization, it will be considered to have been organized from the first day it became subject to the tax code provisions.

People who are wishing to establish such a trust may benefit from discussing how to do so with an estate planning attorney. Trusts may be used as either the primary or secondary vehicle through which one may pass assets to intended beneficiaries. Trusts can also be used to avoid the future probate of an estate and the corresponding expenses as well. When setting up a trust, it is important to choose one that meets the goals of the grantor and protect the assets held by the trust from potential estate taxes.

Source:, ” Charitable Trusts “, November 11, 2014

Trust structures may help with asset management

New Yorkers who want to ensure their possessions are managed properly may rely on wills and similar documents, but living trusts offer an alternative. These structures are notable in that their grantors can name themselves trustees and thus manage the assets they want to safeguard. In addition, other trusts, such as spendthrift trusts, can be included in a living trust so that beneficiaries are explicitly looked after.

Living trusts are exempt from some of the legal requirements associated with wills. For instance, they can often be set up with fewer official procedures, and modifications don’t usually need to be witnessed. Those with complex arrangements might benefit as well; unlike will executors, their trustees can be based in other jurisdictions.

Living trusts can be employed with many goals in mind. Real estate developers and businesspeople may include trust assets such as tenancy properties that can then be overseen by their trustees. When used to benefit family members following a death, trusts can ensure a predetermined division of assets takes place as intended. The fact that probate courts generally don’t get involved in the process means that assets passed along by grantors are continuously owned even if beneficiaries die or other unexpected events occur.

Living trusts can be complex, especially when they involve specific intents or uncommon asset structures. While these trusts are generally easier to draft than wills, failing to account for the laws that apply to particular property types may ultimately render an arrangement ineffective or liable for unforeseen taxes. Some New York property owners find it advantageous to investigate the legal ramifications of the different kinds of trust schemes they can enact before getting started.

Source:  American Bar Association , ” Living Trusts “, November 02, 2014

Robin Williams created revocable trust for assets

Robin Williams fans in New York might be interested to know that his family could be spared the ordeal of going through probate for certain assets. When someone leaves a will, probate courts verify the document and still make decisions regarding the execution of the deceased person’s estate. Court records can reveal specifics of a person’s estate that families might like to keep private. Since Williams set up at least one revocable trust, probate might not affect certain aspects of the late actor’s estate plan.

Revocable trusts offer a range of benefits that wills do not, but they may cost more to create initially. Savings might offset this cost after the documents are established, however. Modifying terms of a revocable trust is a more informal endeavor than making changes to a will. There are many reasons one might wish to change the terms of a trust, including getting married, having a child or getting divorced.

People can also set conditions upon inheritances with a trust. Like Williams, someone could put assets aside for their children in a trust and mandate at what age each child receives all or some of their inheritance. However, trustee must be found to manage the assets before and during their distribution. Another thing to remember when establishing a trust will not do any good unless assets get transferred into it. For people who do not wish to transfer assets into a trust during their lifetime, they can put a testamentary trust in their will. This action ensures that assets go into the trust upon someone’s death.

Estate planning can spare one’s family unnecessary stress and intrusion into their privacy. Developing such a plan might be made easier with consultation with a lawyer.

Source:  Daily Finance, ” Robin Williams’ Estate Plan Spares His Heirs a Lot of Drama “, Dan Caplinger, August 14, 2014

Source:  Daily Finance, ” Robin Williams’ Estate Plan Spares His Heirs a Lot of Drama “, Dan Caplinger, August 14, 2014

A brief outline of irrevocable and revocable trusts

Some New York residents may find that establishing a living trust is an attractive option for guiding asset disbursement upon death while avoiding a potentially frustrating probate process. For an individual considering a revocable or irrevocable trust, understanding some basic points regarding these trusts can help an individual to approach the subject more gracefully with a financial advisor or attorney.

Revocable trusts contain provisions that a grantor can change or cancel at any time while still living. They provide grantors with flexibility in handling assets, but they leave those assets unprotected from debt collection and other potential drains.

Irrevocable trusts cannot be altered once finalized without an affected beneficiary’s consent. Grantors forfeit access to the assets listed in these trusts, but that forfeiture shelters the assets against creditors, estate tax and other expenses when applicable.

Both of these types of trusts enable wills to be handled without subjecting family members to potential embarrassment or conflict at probate hearings. They also enable benefactors to name successor trustees and guardians to manage funds if neither parent is alive to do so. Trustees require exclusive access to the assets in irrevocable trusts to disburse the funds; either finding a bonded trustee or using a bank may help to insure against losses from careless borrowing.

Consultation with an attorney who is familiar with the complexities of trust administration can help a living benefactor organize his or her wishes as clearly as possible. Upon examining the factors present in a client’s financial and family dynamics, a legal professional may see merit in advising a client to seek an irrevocable trust for protection from taxation or a revocable trust to allow the funds to contribute toward long-term debt relief.

Source:  NBR, ” A matter of trusts: Benefactors, heirs and their advisors “, Maureen Niven, August 04, 2014