First, what is a trust? You create a trust by signing a document which names both a trustee and a beneficiary of whatever property you may then transfer into the name of the trust. The trustee is the person you appoint to manage the property you put into the trust. You can name yourself, or any trusted family member as a trustee. The trust property could be a bank or brokerage account, or even real estate. The trust document will provide how the trust property will be used while you are alive, and who will receive the property after you die.
How is a trust different from a will? When you die, your assets are distributed as you provide in your will only after your will has been submitted to probate. Probate is the court-supervised process which reviews and (hopefully) approves your will, and then manages the distribution of your property. Probate can be expensive and very consuming. However, assets held in a trust do not have to wait for the probate process; they can be used and distributed immediately.
Are there different kinds of trusts? There are essentially two kinds of trusts, revocable and irrevocable. A revocable trust is a trust which you can revoke, or simply change the terms of any time you want. An irrevocable trust is a trust that you cannot change after you sign it and transfer property into the name of the trust.
Why would someone use an irrevocable trust? Irrevocable trusts are typically used for estate tax planning purposes, and to help older people plan to qualify for Medicaid benefits. Irrevocable trusts are be very effective for these purposes.
When would someone use a revocable trust? Most people use revocable trusts to transfer property immediately after their death, without having to wait for their will to be probated. It can take many months for your will to be probated, and for your estate to then transfer your property to your children or grandchildren. Aside from the expense of probate, this could be particularly difficult for your family if the property is needed to pay various expenses soon after your death. If you own real estate, especially real estate in more than one state, the probate process can be especially burdensome and expensive. For example, if you have a second home in another state, upon your death your will must first be probated here in New York, and then your estate must submit a copy of the New York probate proceedings to the state where your second home is located for another probate. It is not uncommon for it to take over a year after your death simply to transfer your second home to your children or grandchildren. However, property left through a living trust can pass to your beneficiaries immediately, without probate.
Michael D. Weinstein has been practicing all aspects of family law in Westchester County and the surrounding areas for over 30 years. He specializes in wills, trusts, probate, separation and divorce. His office is located at 150 White Plains Road, Suite 404, Tarrytown, NY 10591, and he can be reached at 914-332-8824, [email protected], or check his website, www.mweinstein.com.