Some people in New York may be under the impression that trusts are only for the wealthy especially if they know a “trust fund baby” who came from money and expects to receive a substantial inheritance in the future. However, even those of lesser means can benefit from having a trust. It is important to understand what a trust does so you can decide whether it is the right estate planning vehicle for you.
What is a trust?
While there are many different types of trusts, all trusts share some common elements. The trust document itself outlines the terms of how the trust will operate. A person designated in the trust as “trustee” carries out the terms of the trust, as set by the grantor (the person who created the trust). In revocable trusts, the grantor has the right to change trust terms if they wish during their lifetime. In irrevocable trusts, the grantor cannot change the terms of the trust during their lifetime. Trustees have a “fiduciary duty” to act in the best interests of the trust beneficiaries (the people who will inherit under the trust).
Trusts are funded by having assets transferred to the trust. This is an important step as an unfunded trust has nothing to offer to the beneficiaries, despite the grantor’s wishes. In addition, the grantor can put contingencies in the trust. For example, a beneficiary may not be able to inherit until they have reached a certain age or pass a certain life milestone.
Why should I consider a trust?
Trusts are very useful estate planning tools. Trusts bypass the probate process, which can be costly and time-consuming. If a person is incapacitated, a trust can be a tool used to manage their assets. If you have minor children, the trustee can manage the minor’s inheritance until the trust states they should be distributed. Assets in a trust can be protected from claims of creditors. If you have a child with special needs, the right kind of trust can ensure they are cared for without jeopardizing their eligibility for government benefits.
Learn more about trusts in New York
As you can see, there are many good reasons to consider including a trust in your estate plan. However, trusts are complex legal documents and are not something that you should try to execute on your own. Fortunately, help is available to those who want to learn more about trusts.