For most people, an estate plan does much more than simply provide a legal roadmap for the division of estate assets after death. In fact, a well drafted estate plan can accomplish a number of important goals such as incapacity planning, retirement planning, and tax and probate avoidance. To accomplish these goals you may decide to include a living trust in your estate plan. Only a lengthy consultation with your estate planning attorney can help you decide if a living trust is right for your estate plan; however, a basic understanding of what a living trust is and some of the reasons living trusts are created is a good place to start.
Trusts fall into one of two categories – testamentary or inter vivos, or living. A testamentary trust is a trust that does not take effect until your death. These trusts are frequently used by parents of minor children because gifts cannot be made directly to a minor child. A trust, therefore, is created that only becomes active in the event the parents die prior to the children reaching the age of majority. A living trust, on the other hand, becomes active when all the elements of creation have been met and sufficient assets to fund the trust have been transferred into the trust.
A living trust can also be revocable or irrevocable. A revocable living trust can be modified or terminated at any time by the maker of the trust whereas an irrevocable trust cannot be changed or terminated by the maker after the trust becomes active. Both types of living trusts offer benefits to the maker.
Though there are other reasons to create an irrevocable living trust, one common reason is to protect assets. Once an asset has been transferred into a properly drafted irrevocable living trust it is no longer legally yours and, therefore, inaccessible to creditors. Irrevocable living trusts can also be used for special needs planning and may provide tax advantages when properly drafted.
A revocable living trust can also be used to achieve numerous objectives. One common reason for the creation of a revocable living trust is incapacity planning. By naming a spouse/parent/adult child as the successor trustee you are able to create a mechanism by which control of all trust assets automatically shifts to your chosen successor trustee should you become incapacitated.
A living trust can provide a wide variety of benefits to your overall estate plan. Consult with your New York estate planning attorney to determine if the inclusion of a living trust is right for your estate plan.