Trusts play a vital role in estate planning. Long Islanders may set up a trust to avoid probate, preserve assets, reduce taxes, or protect vulnerable family members.
1. Irrevocable Trust
The term irrevocable trust is often misleading. The term implies that you cannot change, dissolve or amend an irrevocable trust however, that is not the case. An irrevocable trust can be modified, amended and terminated if need be. Any assets transferred to an irrevocable trust, like cash, stocks, or real estate, become the trust’s legal property, with an independent trustee managing all fund distributions at their discretion.
Irrevocable trusts involve relinquishing control over any trust property. The major advantage of this type of trust is its ability to protect assets from Medicaid, creditor claims, and civil lawsuits. Members of professions that often face civil litigation, like surgeons or financial advisors, often use irrevocable trusts as an asset protection strategy.
2. Life Insurance Trust
A type of irrevocable trust, a life insurance trust can help reduce estate taxes for New York estates worth more than the exemption threshold ($6.11 million as of 2022). The trust owns the life insurance policy, which eliminates the policy’s worth from taxable estate.
Upon the policy holder’s death, the life insurance proceeds will pass directly to children or other designated beneficiaries, bypassing the grantor’s estate. The grantor can specify the exact conditions for fund distribution. For example, they may decide that their adult children can only access trust funds when they are 21 or graduate from college.
3. Special Needs Trust
Special Needs Trusts (SNTs) hold and distribute funds for the benefit of a special needs child or another dependent family member. The main goal of an SNT is to provide for the disabled individual without harming their eligibility for government benefits like Medicaid and SSI.
Most SNTs fall under three main categories:
- Third-party SNT. This type of SNT uses funds from the grantor (like a parent or grandparent).
- First-party SNT. The funds in a first-party SNT come from the beneficiary’s assets. After the beneficiary’s death, the trust uses any remaining assets to reimburse Medicaid.
- Pooled SNTs. A pooled SNT exists under the management of a nonprofit association. These trusts help beneficiaries preserve their assets while saving on administration costs.
4. Revocable Living Trust
A revocable living trust allows the grantor to maintain complete control over their assets. The grantor can serve as a trustee and appoint a successor trustee to take over trust management after their death with the help of a trust administration attorney
The primary function of a revocable trust is avoiding probate. Assets that belong to a revocable trust don’t need to pass through probate, unlike assets that pass to beneficiaries through a will. Trusts can also help avoid inheritance disputes since a trust is more difficult to contest than a will.
5. Charitable Trusts
The most common type of charitable trust is a CRT (Charitable Remainder Trust). A CRT functions like a life income gift that gives the grantor a charitable tax deduction. Then, depending on the trust terms, the grantor or other beneficiaries may receive tax-free income throughout the beneficiary’s lifetime. Upon the beneficiary’s death, the remaining funds in the CRT pass to a charity.
A CLT (Charitable Lead Trust) works the opposite way: the charity receives funds for a predetermined period, and noncharitable beneficiaries, like the grantor’s family, receive the remaining assets at the end.
Choose the Right Trust and Estate Planning Lawyer
Trusts can be complex legal documents that require careful wording. Working with a skilled trust lawyer helps ensure that the trust serves its purpose as part of an estate plan.
This is what makes Sheryll Law, P.C., one of the leading estate and trust law firms on the north shore of Long Island:
- Strategy. Our dedicated estate planning attorneys help clients choose the optimal legal strategies for both long-term and short-term goals.
- Service. We create a custom-tailored estate plan for each client and are always here to answer any questions.
- Innovation. We stay on top of the latest trends and law changes in the estate planning world, like digital asset management and protection.
- Value. We make sure our clients get maximum value for their money with flexible cost structures and flat fees when applicable.
- Ratings. Sheryll Law, P.C. is an award-winning firm with enthusiastic reviews on Google, Avvo, and Birdeye.
Sheryll Law, P.C.: Your Trust Attorney in Riverhead, NY
Conveniently located in Riverhead, only 20 miles from the Hamptons, the skilled trust and estate attorneys of Sheryll Law, P.C., simplify estate planning on the east end of Long Island. Sheryll Law helps clients choose the right types of trusts for optimal financial control, flexibility, and asset protection.
Copyright © 2022. Sheryll Law, P.C. All rights reserved.
The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.