An estate plan in New York can include more than a will. Many people choose to set up a trust as part of the estate planning process.
Contrary to what you may believe, trusts are not only for rich people or people with many high-value assets. A trust can be a valuable addition to an estate plan, no matter the type or amount of assets you own.
What is a trust?
A trust is a financial arrangement that involves a trustee holding assets on your behalf or on behalf of your beneficiaries. Assets may be transferred into trust while you are still alive or after you pass away.
A trust is different than a will, which is a document containing written instructions on how you want your assets distributed after you pass away.
If you choose to set up a trust while you are still living, you can choose to serve as the trustee yourself or appoint a third-party trustee.
Avoiding probate and taxes
As you consider if a trust is right for your situation, here are some advantages to keep in mind. A trust allows you to avoid probate and court costs. Depending on the type of trust, you might also be able to avoid estate taxes since assets in a trust are not considered part of the taxable estate.
You have more control over your wealth with a trust since you control when and how your assets are distributed. Since you are not subject to probate laws, you can avoid assets going to unwanted beneficiaries. Additionally, assets in a trust are often protected from creditors.
Confidentiality and less potential disputes
Some other benefits include privacy, since the terms of a trust are not part of the public record. Trusts cannot be contested the way wills can, reducing family conflict.
There are several different types of trusts and various ways you can specify when and how assets pass from the trust to your beneficiaries. Since avoiding probate is often a goal when setting up a trust, assets in a trust typically pass to beneficiaries faster than they would with a will.
