What is a Revocable Trust and How Does it Work

By Albert Goodwin, Esq. — New York estate planning and probate attorney, Law Offices of Albert Goodwin. Last updated: 2024.

A revocable trust — often called a revocable living trust or inter vivos trust — is a written agreement, valid under New York law, that you create during your lifetime and can amend or revoke at any time before death. This page explains specifically how revocable trusts are created, executed, and funded in New York under the Estates, Powers and Trusts Law (EPTL). For related topics, see our pages on the benefits of a living trust, which assets can and cannot go into a revocable trust, and how a trust helps avoid probate in New York.

How a revocable trust works under New York law

In a trust, the grantor (also called the settlor or creator) transfers assets to a trustee, who holds and manages those assets for the benefit of named beneficiaries. In a revocable trust, the grantor reserves the power to change the trustee, the beneficiaries, or any provision of the trust, and to take assets back out of the trust at will. Because the grantor keeps this control, New York treats the trust property as still belonging to the grantor for tax and creditor purposes.

Most New Yorkers who set up a revocable trust name themselves as the initial trustee and the initial beneficiary, then name successor trustees and successor beneficiaries to take over at death or incapacity. This is what makes a revocable trust function as an alternative — or supplement — to a will.

Example: A New Yorker signs a revocable trust naming herself as trustee and beneficiary, retitling her Manhattan condo and her bank account into the trust. She names her two children as successor beneficiaries. She can later amend the trust to change beneficiaries, change the successor trustee to a bank, or move the condo back into her own name — all without anyone else's consent — simply by executing a trust amendment or by retitling the asset.

New York execution formalities (EPTL 7-1.17)

A lifetime (revocable) trust is not valid in New York unless it meets the formalities of EPTL § 7-1.17. The statute requires that the trust be:

• In writing, and
• Executed and acknowledged by the grantor (the person creating the trust) and, unless the grantor is the sole trustee, by at least one trustee, before a notary public in the manner required for recording a deed; or in the alternative, signed by the grantor in the presence of two witnesses who also sign.

Amendments and revocations of a lifetime trust must generally be executed with the same formalities (EPTL § 7-1.17(b)). Sloppy or unwitnessed signing is one of the most common reasons a homemade trust later fails — which is why execution should follow the statute precisely.

Funding the trust in New York (the step people forget)

A trust controls only the assets actually retitled into it. An unfunded trust accomplishes nothing. Funding methods in New York include:

• Real property: The grantor signs a new deed conveying the property from himself, individually, to himself as trustee of the trust. In New York City the deed is recorded with the City Register through ACRIS (the Automated City Register Information System) for Manhattan, Brooklyn, Queens, and the Bronx; in Staten Island and counties outside the City, the deed is recorded with the County Clerk. (New York does not use a "Registry of Deeds.")
• Bank and brokerage accounts: retitled into the name of the trustee.
• Closely held business interests, certain personal property, and other assets: assigned by separate documents. Some assets — such as retirement accounts and IRAs — generally should not be retitled into a revocable trust; see our page on assets that can and cannot go into a revocable trust.

How a revocable trust avoids probate in New York

In New York, a will must be admitted to probate in the Surrogate's Court of the county where the decedent lived, under the Surrogate's Court Procedure Act (SCPA). Probate requires filing a petition, giving notice to (or obtaining waivers from) distributees, and obtaining Letters Testamentary before the executor can act. Assets that pass through a properly funded revocable trust are non-probate assets and avoid this court process.

When the grantor (serving as trustee and beneficiary) dies, the successor trustee can take control of the trust assets under the trust agreement, which becomes irrevocable at death. For real property, the successor trustee typically records an affidavit of death of trustee, together with a certified death certificate, with the City Register (via ACRIS) or County Clerk where the property is located, establishing the successor trustee's authority of record. This is generally faster and less public than probate. For more detail, see avoiding probate in New York and whether trusts are public record.

A revocable trust does NOT protect assets from creditors or save income tax

Because the grantor keeps full control, a revocable trust offers no creditor protection and no income-tax savings during the grantor's life:

• Income tax: A revocable trust is a "grantor trust" for federal income tax purposes. It uses the grantor's Social Security number, not a separate EIN, and the income is reported on the grantor's individual return.
• Creditors: Assets in a revocable trust remain reachable by the grantor's creditors because the grantor can pull them back out at any time.

By contrast, an irrevocable trust — which the grantor generally cannot amend and from which the grantor cannot freely retrieve assets — may, depending on its terms, remove assets from the grantor's reach for creditor or Medicaid-planning purposes and may file its own return under its own EIN. The trade-off is the loss of control.

Does a revocable trust avoid New York or federal estate tax?

This is the most misunderstood point, so let's be precise:

• It does NOT avoid estate tax by itself. Because the grantor retains control, the trust assets are included in the grantor's gross estate for both federal estate tax and New York estate tax.
• New York estate tax has a "cliff." New York imposes its own estate tax with an exemption amount that is adjusted periodically (in the high-$6 million to $7 million range in recent years). New York is unusual: if a taxable estate exceeds the exemption by more than 5%, the entire estate — not just the excess — is taxed (the so-called New York estate tax cliff). New York has no separate gift tax, but certain gifts made within three years of death are added back.
• Federal estate and GST tax are separate, with a much larger (and scheduled to change) federal exemption. The federal generation-skipping transfer (GST) tax — not the revocable trust itself — is the mechanism that governs whether assets passing to grandchildren and later generations are taxed.
• The Rule Against Perpetuities (EPTL § 9-1.1). A multi-generational trust does not "avoid transfer taxes" simply by lasting a long time. New York limits how long a trust may continue under the Rule Against Perpetuities — generally, no interest may vest beyond lives in being plus 21 years (with the related suspension-of-alienation rule). Keeping assets in trust across generations can defer the retitling of property and may, with proper GST planning, defer federal transfer tax — but it does not eliminate it, and it is constrained by EPTL § 9-1.1.

Genuine estate-tax savings require additional planning (for example, credit-shelter or disclaimer provisions for married couples, irrevocable trusts, or lifetime gifting), not a revocable trust standing alone. See advanced New York estate planning techniques.

What a revocable trust does that a will cannot

• Incapacity planning. If you become incapacitated, a will is useless (it operates only at death) and a power of attorney has limits. A revocable trust can authorize a successor trustee to manage trust assets seamlessly when you become incapacitated — often triggered by a written certification from one or more physicians — and to step back once you recover.
• Ongoing management after death. A will typically distributes assets outright after debts and taxes are paid. A revocable trust can keep assets in trust and managed for years (subject to EPTL § 9-1.1), which is useful for minor children, beneficiaries with special needs, or staggered distributions.
• Privacy. A probated will becomes a public record in the Surrogate's Court; a revocable trust generally is not filed and stays private.

Revocable vs. irrevocable trust in New York

Frequently asked questions about revocable trusts in New York

Does a revocable trust avoid New York estate tax?

No. Because you keep control, the trust assets are included in your New York (and federal) gross estate. A revocable trust avoids probate, not estate tax.

What does it cost to set up a revocable trust in New York?

Cost depends on the complexity of your estate, how many assets must be retitled, and whether incapacity and tax planning are included. A trust generally costs more upfront than a simple will because of drafting detail and the funding process. We provide a fee quote after reviewing your situation.

Is a revocable trust better than a will in New York?

Neither is universally "better." Most well-designed New York plans use a revocable trust together with a "pour-over" will, durable power of attorney, and health care documents. The right mix depends on your assets, family, and goals.

Are revocable trusts public record in New York?

Generally no. A revocable trust is usually not filed with any court and remains private, unlike a probated will. See are trusts public record.

Do I need to record anything with a New York county?

If real property is involved, the deed transferring it into the trust is recorded through ACRIS (City Register) in New York City or with the County Clerk elsewhere. At death, the successor trustee records an affidavit of death of trustee with the same office.

Authoritative resources

• New York Estates, Powers and Trusts Law (EPTL)
• New York Surrogate's Courts
• New York State estate tax (NYS Dept. of Taxation and Finance)
• IRS — Estate Tax

Speak with a New York trust attorney

If you are deciding between a will and a revocable trust, or want a revocable trust drafted and properly funded under New York law, the Law Offices of Albert Goodwin can help. We work with clients throughout New York City, Brooklyn, and Queens. Call 212-233-1233 or email [email protected] to schedule a consultation.

This article is for general information about New York law and is not legal or tax advice. Estate and tax rules change and apply differently to each situation; consult a qualified New York attorney about your specific circumstances.