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Should You Have a Living Trust?

Posted by attorney Cheryl Fratello

Living trusts have received a lot of attention lately. There are few of us who have not received an invite in the mail to attend a seminar that promotes living trusts. Do you know if you should consider using a living trust in your estate plan?

A living trust is a legal document that you create during your life. The trust “holds" and manages your assets during your life, and can distributes them upon your death, much like a will. You appoint a trustee to manage the trust assets. The following are some of the most common reasons to consider when contemplating the use of a living trust.

  • You own real estate in another state. If you own property in another state, your will may have to be probated in multiple states. By transferring the out-of-state property to a living trust, you can avoid having to probate your will in multiple states, thereby reducing time and cost.
  • You do not want your will to be public record. When you probate a will in New York, you must file the will with the Surrogate’s Court. Once filed, anyone can access the file that contains the will. In most cases and with careful planning, a living trust remains private after your death.
  • You want to protect your assets as part of Medicaid planning. Many people choose to protect their assets by engaging in Medicaid planning. Transferring assets to a living trust designed for Medicaid planning may achieve asset protection after a period of time.
  • You want to provide for a disabled person. Supplemental Needs Trusts are trusts that can be created for a chronically or severely disabled family member. An outright gift or bequest to a disabled beneficiary will often have the effect of diminishing the beneficiary’s public assistance. Creating this type of trust permits a beneficiary to maintain public assistance benefits and protect the assets in the trust.
  • You have family members that cannot be located. A will probate proceeding in New York requires that you locate certain family members even though you may not be leaving a bequest to them. If they cannot be found, you must demonstrate to the court that you diligently searched for the absent family member. Attempting to locate a missing family member can delay an estate proceeding and prove to be costly.
  • You want a vehicle for asset management. Some people do not want to manage their own assets and choose to allow a trustee to control their assets by using a living trust. By law, a trustee must exercise a high degree of care in managing trust funds.
  • You think that someone may contest your will. If someone suspects that his or her will may be challenged by a disgruntled heir, they will often consider using a living trust. It is usually more difficult to challenge a trust. Certain family members are put on notice when a will is probated possibly resulting in a will contest or delay of the probate proceeding. A properly drafted and utilized trust can avoid this notice requirement.
  • You wish to avoid probating your will. The proper use of a living trust may allow you to avoid the court’s supervision of your estate and avoid a probate proceeding entirely. Your estate may save time and expense in avoiding probate.
  • You want to plan for incapacity. When drafting a trust you can name a co-trustee or an alternative trustee to manage the assets in your trust should you become incapacitated. If you become incapacitated, your trustee can “step into your shoes" and manage the trusts assets for you.
  • You want to minimize estate taxes. Certain types of living trusts, such as irrevocable life insurance trusts, can assist in reducing the size of your taxable estate and help to preserve assets for your heirs.

A living trust is not for everyone. If you think that any of the above listed reasons for considering a living trust applies to you, you should contact an estate planning attorney to discuss your estate planning goals.

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