New York Living
Trusts
by Jeffrey
Zisselman
| Click here for new information about Group Life Insurance Programs by Jeffrey Zisselman Customarily with most high net worth clients, our firm recommends that you establish a living trust to serve as the primary ownership and dispositive document in your estate plan. Simply, a trust is an agreement whereby one person, the trustee, holds legal title to an asset and manages it for the benefit of someone else, the beneficiary. The person who conveys the property to the trustee is called the settlor or grantor. Any assets held in the Living Trust will avoid the costs and public exposure associated with probate. Typically, 30-40% of the estate administration costs, which can equal approximately 3-9% of the estate, can be saved. |
Living Trusts can help you and your loved ones. |
A trust allows the settlor to control property after his or her death. By placing money or property in trust, the settlor can prevent giving outright control of money or property to a beneficiary who is not able to manage it because of immaturity, incompetency, or illness. The trustee must distribute the money or property, and any income derived therefrom, to the beneficiaries according to the settlor's instructions set out in the trust agreement.
There are two general types of trusts - living and testamentary. A testamentary trust is a trust which is created by the settlor's will. Therefore, the trust does not come into effect until the settlor's death. Commonly, the beneficiaries of a testamentary trust will be the settlor's spouse and minor children.
Living Trusts are trusts which come into effect during the settlor's
lifetime for the benefit of the settlor and the settlor's spouse and
children. Upon the settlor's death, all money and property in a living
trust pass to the beneficiaries via the trust agreement, and not the
settlor's will. Therefore, any money or property in a living trust avoids
probate. This is significant since probate has three major disadvantages:
(1) Publicity: Dispositions made by will are public documents. Details
of the deceased's financial affairs are in the records, as are the size
of the estate, the names of the recipients, what they receive and on
what terms. A living trust generally keeps these matters private. It
is possible that questions may arise concerning the interpretation of
trust provisions, potentially giving rise to a legal action of public
record. Additionally, clearing title to trust property may require disclosure.
In general, however, there is less publicity if probate is avoided,
and this is a primary concern for the high net worth estate.
(2) Delay: In most states, probate estates must remain open for a period of at least six months so that creditors are given an opportunity to file claims against the estate. Therefore, if it is necessary for the beneficiaries to obtain cash quickly, special steps must be taken to prevent delay. With a trust, the assets can be administered without any such delay.
(3) Costs: The more property that is includible in the probate estate, the larger the fees of the executor and his legal counsel. Setting up a living trust usually involves higher legal expenses and perhaps trustees' fees, but these are not likely to be as high as those involved in probating an estate. In addition, the probate court may be required to appoint appraisers, as well as guardians if the interests of minor children are involved. Each of these can be a further financial drain on the estate.
Living trusts may be either revocable or irrevocable. In addition to the benefits of avoiding probate, an irrevocable living trust creates income and estate tax savings if drafted properly. Generally, income generated by money or property placed into an irrevocable living trust is not taxed to the settlor. Also, upon the settlor's death the value of the money or property will not be included in his or her gross estate for estate tax purposes.
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