For some New York residents, a trust makes a lot of sense. Does that mean that everyone needs to make a trust? Not necessarily. Even with the many benefits of a trust, many people are fine with a just will. But if one or more of the following applies to you, then you should strongly consider a trust:
Your Heirs Will Need Fast Access to Funds– It typically takes about eight months for heirs to have access to money from the estate. It will take a few months to get an executor appointed, and a few more months for the executor to clear all the red tape. As New York City courts are getting more backlogged due to budget cuts, it takes the courts more time to process an estate, resulting in longer waiting times for heirs to receive their inheritance. When you make a trust, your trustee gets immediate access to the funds right after your death, and is able to distribute funds to your heirs are per your wishes.
You Have Children From Your First Marriage – If you wish for your second wife (or husband) to use your funds after your death and then for the funds to pass to your children, not the second wife’s children, the only way to do that is through a trust.
Your Only Surviving Family Members are Distant Relatives – Estate where distant relatives are in play takes much longer, even if you did not leave anything to them in the will. The Public Administrator will have to get involved, and the court will possibly appoint a guardian ad litem (an attorney for unknown heirs) to protect your distant relatives’ right to get notice of the probate of your will.
You Have Creditors – Unlike some other states, New York does not have a requirement to publish the administration of a trust. So your creditors may not find out about your death and the administration of your estate until it’s too late for them to do anything about it.
Your Heirs Have Creditors – If your heirs have creditors, a “spendthrift trust” can be used to restrict creditors from accessing the trust’s principal.
Your Heirs Can’t Manage Money – A “spendthrift trust” can be used to appoint a trustee who will determine your heirs’ needs and give them the appropriate amount of money to prevent excessive spending.
Tax Benefits – If you are comfortable giving up control of your assets, you can make a type of trust which provides estate tax and other benefits. If you don’t mind having your children manage your money during your lifetime, this may be the right trust for you.
You Want to Qualify for Medicaid – If you wish to qualify for Medicaid, there may be a trust or a set of trusts and other tools that can work for you. Read our article about Medicaid Trusts to find out more.
You Don’t Want Your Daughter-in-Law or Son-In-Law to Inherit your Estate – If you leave your money to your child outright and they die before their spouse, their husband or wife will get the money. If that’s not the result that you want, then a trust is right for you.
You Want to Impose Conditions on Receiving the Inheritance – for example, you don’t want your grandson to get the entire inheritance until he turns 25, or you want to give the inheritance in stages (for example, 1/3 when turns 20, 1/3 when turns 25, and 1/3 when turns 30).
If any of the above apply to you, talk to an estate attorney about setting up a trust. If you do decide to make a trust, make sure your New York estate attorney avoids the following common mistakes:
Don’t forget to actually transfer your property into the trust. If your property stays in your name, a trust is not complete and not valid, nothing more than a fancy binder. For the trust to work properly, property has to be transferred from your name to the trust’s name.
You still need a will as a backup. Even if you make a trust, make a will anyway, directing all of your property to go into the trust. We call this a “pour over will”. We make those just in case you’ll have property is not transferred into the trust.
Warning: If you anticipate that someone will try to overturn your estate plan, a trust may or may not be for you. There are different standards for capacity and execution when dealing with trusts or wills, and it will depend on your situation which one is right for you.
In New York, a trust provides a slew of benefits, many of which are not available in other states:
- Eliminates the Need for a Court Proceeding – unlike a will, a trust does not have to be filed in court.
- No Need to Notify Creditors – unlike a will, and unlike trusts in other states, there is no need to notify your creditors after your death. So the creditors may not even find out that you passed away, and will have difficulty making their claims.
- No Need for Publication – unlike in many other states, you don’t need to publish a notice of trust.
- No Need for Filing – unlike a will, your trust will not have to be filed in court, filed with the clerk, or published in newspapers, ensuring its privacy.
- You Can Select a Lifetime Beneficiary and Remainder Beneficiaries – unlike a will, where all of the property has to be distributed, with a trust you can hold back some of the property. This gives you the flexibility to do things like have your second wife hold property during her lifetime and have the remainder pass to your children after her death
- You Can Attach Conditions to Receiving an Inheritance – such as not have your grandchild get their inheritance until they graduate from college or get married. Can’t do that with a will.
I hope this article has been helpful in your decision whether or not to consider making a trust. If you are looking for an attorney to draft your trust or just to talk to about the costs and benefits of a New York trust, call the Law Offices of Albert Goodwin at (212) 233-1233.