Trust Lawyer

What a Trust Can Do for You

These are the goals a trust lawyer is most often asked to accomplish.

• Qualify for Medicaid

  A trust can help you qualify for Medicaid, including home care and nursing home coverage, so that your assets are not spent down on medical and long-term care and can pass to your family instead. Learn more about a Medicaid trust.

• Protection from creditors and lawsuits

  A properly executed and funded irrevocable trust shields the trust principal from creditors and lawsuits.

• Avoid probate, in one state or several

  Probate can be expensive and slow, and the proceedings are public record, so anyone can find out the extent and location of your assets. Property you transfer to a trust does not go through probate and stays private. If you own property in more than one state, a trust also avoids ancillary probate: on your death the property passes under the trust, and no multi-state Surrogate’s Court proceedings are needed.

• Protection from your children’s spouses and creditors

  You may not want what you leave a child to end up with that child’s spouse in a divorce or as an inheritance, or with the child’s creditors after a lawsuit or bankruptcy. A trust can keep those assets in the blood family.

• Limits for irresponsible or inexperienced beneficiaries

  A trust sets the terms on which beneficiaries receive and spend the assets. You can, for example, release specified amounts when a beneficiary reaches a specified age.

• Management of funds for minor children or grandchildren

  Minors cannot manage money, so a trustee has to do it for them. If children inherit without a trust, their parent or guardian cannot reach the funds without a lengthy court proceeding and heavy court oversight: the court endorses every check and requires multiple reports each year.

• Continuity of income and management

  A trust keeps your assets under continuous management, so income and use of the assets are not interrupted when you die or become disabled. Without one, your estate or business may be subject to restrictions imposed by the probate court.

• Planning for mental disability

  A trust lets you choose the trustee who will manage your affairs if you become unable to do so yourself. Read more in Planning for Disability.

• Preserving a loved one’s Medicaid and SSI

  If a beneficiary is disabled and receives means-tested benefits such as Medicaid or SSI, a Special Needs Trust (also called a Supplemental Needs Trust) preserves that eligibility. The government continues to pay for the beneficiary’s care, and your assets supplement it rather than replace it.

• Saving estate tax

  A trust can legally save a substantial amount of estate tax. A credit shelter trust, a life insurance trust, a “QTIP” trust or a QDT trust for the benefit of your spouse can each further that goal; read How to Avoid Estate Taxes. A Charitable Remainder Trust (CRT) or Charitable Lead Trust (CLT) maximizes the tax advantage of each charitable dollar, and a Grantor Retained Annuity Trust (GRAT), an Intentionally Defective Grantor Trust (IDGT) or a Unitrust removes future appreciation of your property from your estate. Read more in Advanced Estate Planning.

Revocable or Irrevocable

A revocable trust does not offer enough protection to be considered an asset protection tool. The law treats assets in a revocable trust as still belonging to the person who put them there, because that person keeps so much control: the trust can be changed at will and even revoked outright. For asset protection in New York, only an irrevocable trust does the job.

A trust lawyer still uses revocable trusts in many situations. They are flexible, since you can change or revoke them at any time and for any reason, and they become irrevocable at the death of the person who made them, so they deliver many of the other benefits described above, including probate avoidance and privacy.

An Irrevocable Life Insurance Trust (ILIT) is set up to own a life insurance policy so that, when the insured dies, the proceeds are not part of the taxable estate. The insured can keep paying the premiums through “Crummey” gifts to the trust. The downside is that the trust cannot be changed; the upside, if it is set up correctly, is no estate tax on the proceeds. Where an existing policy is transferred into the trust, the trust is treated as the owner after three years, which keeps the proceeds and any appreciation in the policy out of your estate. The IRS requirements are exacting, so a life insurance trust has to be drafted carefully.

Trust Litigation

The second half of a trust lawyer’s practice begins when the planning has gone wrong or is under attack. We represent beneficiaries and trustees on either side of the disputes described below.

Someone Was Left Out of the Trust

When a client has been cut out of a trust, we investigate whether the decedent was incapacitated, coerced or defrauded, and we look into forgery and improper execution. Sometimes a later will or trust turns up. We gather the evidence and argue the legal theory that gives our client the best possible settlement or verdict, and if the evidence is there, we take the case to trial to prove that the trust is invalid and should be set aside. We also defend trusts that a beneficiary is trying to contest; we can act for the proponent of the trust or for the objectant.

Accusations of Stealing from a Trust

Trustees do not usually steal from a trust, but it happens often enough. Trustees have access to the funds, and for some people the temptation is too much. We have seen it done by administrators, by trustees and even by probate lawyers. A trust lawyer helps beneficiaries bring an accounting proceeding to get a formal report of how the trust has been handled and to get missing property back into the trust. In the worst cases, where self-dealing or theft can be shown, the beneficiaries can seek the trustee’s removal. We represent either side: the beneficiary alleging theft, or the trustee whose position is that everything done was proper.

Disagreements and Unclear Language

Some trustees act as if they had absolute power and treat beneficiaries unreasonably; some beneficiaries make unreasonable demands of a trustee. Many of these disagreements, over whether to sell or keep an asset, over valuation, over who gets what and over items with sentimental value, can be resolved without court intervention, and we work to obtain the best possible distribution for our clients.

Ambiguity is a separate problem. When a will, trust or other disposition document was not carefully drafted, its instructions can be read more than one way. Whether the ambiguity works for or against our client, we make every effort to have the document interpreted in our client’s favor.

Kinship Disputes

When someone’s relationship to the deceased is in question, a kinship proceeding follows, and the claimant needs to prove kinship and, sometimes, to exclude the kinship of others. These cases can require looking back several generations and unravelling vague family history.

More generally, a trust lawyer acts for beneficiaries or for the trustee whenever relatives of the decedent try to overturn the trust, beneficiaries claim the trustee has done something wrong, an interested person tries to cancel a gift the decedent made to the trustee, an heir tries to cancel a beneficiary designation, a beneficiary challenges the trustee’s qualifications, a spouse presents an inflated elective share claim, or a beneficiary or business partner claims a share of the business. In each of these the lawyer can also protect the trustee against unfair allegations.

Defending the Trust and the Trustee

A New York resident has the right to cut people out of a trust. A trust lawyer helps a trustee clear the trust of allegations and proceed to close it and distribute the assets to the rightful beneficiaries, sometimes with small settlements and sometimes with none. Trustees are also unjustly accused of taking trust funds or property, or of overspending on trust expenses; in those situations we work with the trustee to remedy the situation and put the misunderstanding to rest.

Beneficiaries sometimes have a personal problem with the trustee rather than a legal one. A simple solution is often a bond, which works like insurance against the trustee’s potential misconduct and frequently puts the beneficiaries at ease. If a bond cannot be posted, or the beneficiaries want the trustee out no matter what, it is up to them to prove why the trustee is not qualified, and we show the court that the claim has no basis.

Defending Pre-Death Gifts and Beneficiary Designations

People are entitled to make gifts during their lifetime, and those gifts are often challenged after the giver dies. Claimants argue that the giver “did not really intend to make the gift” or was taken advantage of. We mount a vigorous defense: we show that the giver made the gift of his or her own free will, and that whatever issues the claimant has with the gift are not enough to change the fact that it was made. Most challenges to pre-death transfers can be defended successfully.

Beneficiary designations are challenged in the same way, by people who were not named or who received less than they expected. They claim the account owner was tricked into signing the form or did not know what it was. The burden of proving that is on the challenger. We show the court that the owner made the designation freely, with full understanding and without any technical defect.

Inflated Spousal Elective Share Claims

A disinherited spouse is entitled to claim up to one-third of the decedent’s trust, and to a third of any property the decedent owned up to a year before death, recapturing that property even if the decedent had transferred it to someone else. A spouse may try to overvalue the trust in the hope of a larger elective share, or try to include the trustee’s own property in the valuation. If the spouse and the trustee disagree about the amount, it is up to the spouse to prove to the court how the trustee is wrong, and we defend trustees vigorously against attempts to inflate the share.

The Trustee’s Share in a Business

Trustees are often in business with the decedent, sometimes for decades, having contributed significantly to the company, held a share in it or drawn compensation from it. Relatives who were never involved in the business tend to challenge the trustee’s share, ignoring those years of work. We show the court that the trustee is entitled to the share of the business and to its income and control.

Claims Against a Trust

After a death, all kinds of people and entities make claims against the trust. The most common claimants are creditors, alleged business partners, life partners, ex-spouses, the IRS and Medicaid. Often the claimant cannot produce any proof, whether documents or testimony, and even a genuine claim is frequently overstated. We make sure that if a claim is paid at all, the claimant receives no more than a reasonable settlement.

If you are looking for a trust lawyer in New York, whether to set up a trust or to resolve a dispute over one, call us at 212-233-1233 or email [email protected].