How to Set Up a Trust in New York City

If you decide a trust is right for your situation, here are the steps to set one up in New York:

• Find an experienced attorney

  Look for an estate planning attorney who deals with drafting customized trusts to meet client goals.

• Meet with the attorney and explain your situation and your goals

  Discuss your financial and family situation and explore the benefits that a trust can provide. It can be avoiding probate, managing assets if you become incapacitated, providing for your spouse and children, protecting assets from creditors, and qualifying for Medicaid. The attorney will help you decide on the best trust type and terms.

• Provide relevant information to the attorney

  This includes details on your assets, information about potential trustees, beneficiaries, and any specific distribution wishes. The attorney needs this to properly draft the trust.

• Review the trust drafts with your attorney

  Go through the document line-by-line to ensure all your wishes are reflected and the trust meets legal requirements. Ask questions if anything is unclear before finalizing.

• Formally execute the trust documents

  Following your state’s requirements, formally finalize the trust by signing the documents in front of witnesses and/or a notary public. This legally establishes the trust.

• Transfer ownership of assets to fund the trust

  To activate the trust, retitle accounts, property, etc. in the name of the trustee to be owned and managed by the trust. Record and save documentation of asset transfers.

• Notify the trustee of the trust

  Let the trustee know the trust exists and let them know where to find it or give them a copy.

Trusts can be extremely useful but they must be properly set up and maintained. We have extensive experience advising New York clients on setting up customized trusts to meet their specific needs.

If you need legal representation, we at the Law Offices of Albert Goodwin are here for you. We are located in Midtown Manhattan in New York City. You can call us at 212-233-1233 or send us an email at [email protected].

The First Conversation: Identifying What the Trust Needs to Accomplish

Trusts are tools, not products. The same trust structure can be brilliant for one family and pointless for another. Before drafting begins, the attorney needs to understand what you are actually trying to accomplish. Common goals include:

• Avoiding the cost, delay, and publicity of probate.
• Providing for a surviving spouse while preserving assets for children of an earlier marriage.
• Holding assets for minor or young-adult children rather than distributing outright.
• Providing for a beneficiary with disabilities without disqualifying them from government benefits.
• Sheltering assets from a current or future creditor exposure.
• Qualifying for Medicaid by moving assets out of countable resources.
• Reducing federal or New York estate tax exposure.
• Holding a family home or vacation property for multi-generational use.
• Providing professional management of assets if you become incapacitated.
• Maintaining privacy about the size or distribution of your estate.

Most clients have more than one goal. The right trust structure balances the goals, recognizing that some may conflict (creditor protection generally requires giving up control; control during life generally requires keeping the trust revocable; revocable trusts do not provide much creditor protection). The attorney helps you understand the trade-offs.

Choosing the Type of Trust

Once goals are clear, the attorney recommends a trust structure. The most common structures we use include:

Revocable living trust. The general-purpose probate-avoidance and incapacity-planning tool. You retain full control during life, the trust becomes irrevocable at death, and assets pass to beneficiaries without probate.

Irrevocable Medicaid asset protection trust. Designed to hold the home and other significant assets outside Medicaid's countable resources after the five-year look-back has expired. You can retain a life estate or right of occupancy but give up the right to revoke or control the assets.

Special needs trust. Holds assets for a disabled beneficiary without disqualifying the beneficiary from government benefits. First-party SNTs hold the beneficiary's own assets and require Medicaid payback at death; third-party SNTs hold someone else's assets and avoid the payback.

Irrevocable life insurance trust (ILIT). Owns life insurance policies on your life so the death benefit passes outside your estate for tax purposes.

Credit shelter trust and marital trust. Used together in larger estates to use both spouses' federal and New York estate tax exemptions efficiently.

Spousal lifetime access trust (SLAT). A married client uses the federal lifetime gift exemption while providing the other spouse with indirect access to the assets.

Generation-skipping trust. Holds assets for children, grandchildren, and beyond, using the GST exemption to move wealth across generations efficiently.

Charitable remainder trust and charitable lead trust. Combines charitable giving with income for non-charitable beneficiaries.

Each of these has specific rules and is appropriate in specific situations. Many estate plans use more than one type — a revocable living trust as the central planning document, with one or more irrevocable trusts for specific purposes.

Drafting and Review

Once the structure is chosen, the attorney drafts the trust document. The draft includes:

• The trust name and effective date.
• Identification of the grantor, trustee, and beneficiaries.
• Distribution provisions during the grantor's life (for living trusts) and after death.
• Trustee powers and duties.
• Successor trustee provisions.
• Trust protector provisions where appropriate.
• Termination provisions.
• Boilerplate provisions covering taxes, choice of law, severability, and similar items.

The draft is typically sent for client review within one to two weeks of the planning meeting. The client reviews, asks questions, and requests changes. The attorney revises and the cycle repeats until the document is right. Most trusts go through two or three rounds of revisions.

The Signing Ceremony

New York does not require a particular formality for inter vivos trusts — unlike wills, which require specific witnesses and publication. The trust is created by the grantor signing the document. Most attorneys include a notarized signature and sometimes one or two witnesses to provide additional evidence of authenticity. A self-proving notarized signature is generally enough.

Testamentary trusts (created in a will) require the same formalities as wills. The will is executed with the formalities of EPTL § 3-2.1, and the trust is created when the will is admitted to probate.

Funding the Trust — The Step Most People Skip

This is the most consequential and the most frequently neglected step. A trust document is just a piece of paper if it does not own anything. To make the trust effective, you must transfer specific assets into the trust by retitling them in the trust's name.

• Real estate is transferred by recording a new deed from the grantor to the grantor as trustee.
• Bank accounts are retitled at the bank, which usually requires bringing in a Certification of Trust and identifying the trust's tax ID number.
• Brokerage accounts are similarly retitled, with the broker requiring a Certification of Trust.
• Vehicles can be retitled through the DMV.
• Closely-held business interests are transferred by assignment, which may require consent of the other owners under any operating or shareholders' agreement.
• Tangible personal property can be transferred by general assignment.
• Beneficiary designations on life insurance and retirement accounts can be updated to name the trust as beneficiary, where that fits the planning.

Each of these requires action. The attorney typically prepares the documents needed for the real estate and other big-ticket transfers and provides guidance on the rest. The client and the attorney together work through the funding checklist over several weeks.

Pour-Over Will

A trust-based plan usually includes a pour-over will to cover assets the grantor never transferred into the trust during life. The pour-over will is short — it simply directs that any probate assets be paid over to the trust at death, where they can then be administered under the trust's terms. The pour-over will is a safety net. It does not eliminate probate for the assets it catches, so the goal is to fund the trust completely during life and minimize what flows through the pour-over.

Coordinating the Plan

A complete estate plan with a trust usually involves multiple documents: the trust, the pour-over will, a durable power of attorney, a health care proxy, a HIPAA release, and sometimes beneficiary designation updates and gift tax returns. The documents need to be coordinated so that they all point in the same direction and do not contradict each other.