Asset Protection Trusts in New York: A Trusts Lawyer's Guide

Reviewed by Albert Goodwin, Esq., a New York attorney admitted to practice in the State of New York. Last updated: June 2024.

A trust is a legal arrangement in which a grantor transfers property to a trustee, who holds and manages it for the benefit of named beneficiaries under terms the grantor sets. In New York, trusts are governed primarily by the Estates, Powers and Trusts Law (EPTL), and trust litigation and accounting proceedings are governed by the Surrogate's Court Procedure Act (SCPA). This page explains how trusts function as an asset protection tool under New York law, when they actually shield assets and when they do not, and where to go on this site for the deeper, situation-specific guidance you may need.

The Core Asset Protection Principle: Revocable vs. Irrevocable Trusts in New York

The single most important concept in trust-based asset protection is the difference between a revocable and an irrevocable trust. This distinction determines whether the trust protects assets at all.

A revocable trust (sometimes called a living trust) gives the grantor the power to amend or revoke it at any time. Because the grantor retains that control, New York treats the trust assets as if the grantor still owns them. Under EPTL § 7-3.1(a), a disposition in trust for the use of the creator is void as against the creator's existing and subsequent creditors. In plain terms, a revocable trust offers no protection from your own creditors or lawsuits. Its real value lies in avoiding probate, providing for incapacity, and keeping your affairs private — not in shielding assets.

An irrevocable trust works differently. When you give up the power to revoke or control the trust and genuinely part with ownership of the assets, those assets generally cease to be yours for creditor purposes. Properly drafted and funded, an irrevocable trust can place the principal beyond the reach of future creditors and lawsuits. The trade-off is the loss of control: you cannot simply reverse the transfer.

Two cautions apply in New York. First, transfers made to defeat existing or reasonably foreseeable creditors can be unwound as fraudulent conveyances under New York's Uniform Voidable Transactions Act (Debtor and Creditor Law, Article 10). Asset protection planning works best before a claim arises, not after. Second, a trust that pays income or principal back to the grantor at the trustee's discretion may expose the trust to the grantor's creditors up to the maximum amount that could be paid to the grantor (EPTL § 7-3.1). Effective protection requires drafting that limits the grantor's beneficial interest.

What Asset Protection Trusts Can Actually Accomplish in New York

• Shielding principal from future creditors and lawsuits. A correctly structured and timely funded irrevocable trust can protect the trust principal from claims that arise after the transfer.
• Avoiding probate. Assets titled in a trust pass under the trust terms and do not go through Surrogate's Court probate, reducing delay, cost, and public exposure. See our guide to avoiding probate in New York.
• Avoiding ancillary probate in other states. Real property in multiple states normally requires a separate proceeding in each state. Transferring that property to a trust avoids multiple Surrogate's Court (or out-of-state) proceedings.
• Privacy. A probated will becomes a public record, and interested parties can review the file under SCPA § 2307-a and court access rules. A trust is generally a private document. See are trusts public record.
• Controlling how and when beneficiaries receive assets. Trusts can stagger distributions by age, condition distributions on milestones, or hold assets for minors so they are not handed funds outright.
• Continuity of management on incapacity. A funded trust lets a successor trustee step in without a court guardianship proceeding under Mental Hygiene Law Article 81. See planning for your own disability.

Choosing the Right Type of Trust

"Asset protection" is not a single product. The right vehicle depends on your goal. Rather than repeat the detail covered elsewhere on this site, here is a map to the specific trusts and where to read more:

• Revocable living trust — probate avoidance, incapacity planning, and privacy (but not creditor protection). Read the benefits of a living trust and which assets can and cannot go into a revocable trust.
• Medicaid asset protection trust — an irrevocable trust used to qualify for Medicaid long-term care. New York applies a five-year (60-month) look-back for nursing-home Medicaid; the look-back for community-based (home care) Medicaid is being phased in. Learn more about using a Medicaid trust to qualify.
• Special (supplemental) needs trust — preserves a disabled beneficiary's eligibility for means-tested programs such as Medicaid and SSI, authorized under EPTL § 7-1.12. See the benefits of a special needs trust.
• Irrevocable life insurance trust (ILIT) — owns a life insurance policy so the proceeds fall outside the taxable estate. Note the three-year inclusion rule under IRC § 2035 for policies transferred into an ILIT.
• Advanced techniques — credit shelter trusts, QTIP and QDOT trusts, GRATs, IDGTs, charitable remainder and lead trusts. These are explained in advanced New York estate planning techniques.
• Professionals and high-risk occupations — see asset protection for doctors and moving assets under one spouse.

Trusts and New York / Federal Estate Tax

New York imposes its own estate tax separate from the federal tax. The New York exclusion amount is set by Tax Law § 952 and adjusts over time (it was $6.94 million for deaths in 2024). New York also applies a "cliff": estates exceeding the exclusion by more than 5% lose the benefit of the exclusion entirely, which makes trust planning around the threshold especially important. The federal estate tax exclusion is far higher (over $13 million per person in 2024) but is scheduled to drop substantially after 2025 unless Congress acts. Because thresholds change, confirm current figures before relying on them. Read how to reduce estate taxes for credit shelter, QTIP, and life insurance trust strategies.

The Spousal Right of Election

One limit on trust planning deserves emphasis. Under EPTL § 5-1.1-A, a surviving spouse in New York has a right of election to claim the greater of $50,000 or one-third of the net estate. The statute reaches certain "testamentary substitutes," including some revocable trust assets and gifts made within a year of death, so a trust generally cannot be used to disinherit a spouse below the elective share. Planning around a spouse requires either a properly executed waiver or a structure that satisfies the elective-share rules.

When Trust Disputes Arise

A trust can be contested or its administration challenged. Because these topics are covered in depth on dedicated pages, we link rather than repeat:

• Validity challenges — claims of incapacity, undue influence, fraud, or improper execution. See breach of trust and trust attorney in NYC.
• Trustee misconduct and self-dealing — beneficiaries may demand a formal accounting under SCPA Article 22 and seek removal of a trustee under SCPA § 711. See breach of fiduciary duty.
• Beneficiary information rights — a beneficiary's right to trust documents and reporting is addressed in beneficiaries' rights to trust information.
• Accountings — see our trust and estate accounting overview.

Frequently Asked Questions About New York Trusts

Does a revocable trust protect my assets from creditors in New York?

No. Under EPTL § 7-3.1, assets in a revocable trust remain reachable by the grantor's creditors because the grantor keeps the power to revoke. A revocable trust helps with probate avoidance, incapacity, and privacy — not creditor protection.

How long before a transfer to a trust protects assets?

It depends on the purpose. For Medicaid nursing-home eligibility, New York applies a five-year look-back. For general creditor protection, transfers made to evade existing or foreseeable creditors can be challenged under the Debtor and Creditor Law, so planning should occur well before any claim is anticipated.

Can I be the trustee of my own asset protection trust?

For an irrevocable asset protection or Medicaid trust, retaining control as trustee or keeping access to principal can defeat the protection. These trusts typically name an independent trustee and limit the grantor's beneficial interest. A revocable trust, by contrast, is usually managed by the grantor during life.

Are trusts public record in New York?

Generally no. Unlike a probated will, a trust is a private document and is not filed with the Surrogate's Court in the ordinary course. See are trusts public record and are trusts registered.

Can a trust override a surviving spouse's rights?

Not entirely. EPTL § 5-1.1-A gives a surviving spouse a right of election that reaches certain trust assets and testamentary substitutes, so a trust cannot be used to leave a spouse less than the elective share without a valid waiver.

Speak With a New York Trusts Lawyer

Albert Goodwin, Esq. is a New York attorney who counsels clients on trust planning and trust litigation throughout the New York City area and surrounding counties, including New York County (Manhattan), Kings County (Brooklyn), Bronx County, Queens County, Richmond County (Staten Island), Nassau County, and Westchester County. To discuss whether a trust fits your asset protection goals under New York law, call (212) 233-1233.

This page provides general information about New York law and is not legal advice. Statutory thresholds and Medicaid rules change; verify current figures and consult an attorney about your specific situation.