What Is a Trust?
A trust is a fiduciary relationship in which one individual (known as the grantor), gives another party (the trustee), the right to hold title to assets or property. In many cases, the grantor and the trustee are the same person, then a successor trustee takes over when the grantor dies or becomes incapacitated. The overall goals of a trust are to provide legal protection for assets, to ensure those assets are properly distributed to beneficiaries upon the death of the grantor, and, in some cases, to avoid or reduce inheritance taxes or estate taxes. Although many people think of a trust as only something for the very rich, these documents are extremely versatile and can be used for a wide variety of purposes. Whether you are planning for the future of your children, loved ones with special needs, or your own incapacity, the Long Island trust attorneys at Davidov Law Group can provide you with the answers you need regarding trusts. Our Long Island Trust attorneys strive to make a difference in the lives of families by helping create comprehensive estate plans that may include the use of trusts.
What are the Risks When a Loved One Dies Without a Trust?
If a loved one dies without a trust but does have a will, then the estate will go through the New York probate process. If a loved one dies without a trust or a will, the estate will also go through the New York probate process, but the state of New York will determine how the estate will be distributed under probate laws. It is estimated that more than half of all adults have neither a will nor a trust. While it is relatively easy to understand why an individual in his or her 20s might not find it necessary to have an estate plan, for those who are in their 50s or older having an estate plan is crucial.
Many people wrongly assume they do not have sufficient assets to warrant an estate plan, and many more believe that trusts are only for the very wealthy. Yet when a loved one dies without a will, trust, or other estate planning documents, family members can face a barrage of legal issues when they should only have to deal with their grief. Whether you have a trust, a will, or both in your estate plan, do not leave your family members struggling to figure out how you would have wanted your assets distributed. Having a trust in place can help you avoid probate, which can be
What Are the Benefits of Hiring Davidov Law Group Trust Attorneys?
Having Long Island trust attorneys from Davidov Law Group in your corner can make a significant difference both in the planning and preparation of your trust as well as for the administration of your trust. A trust attorney is an estate planning professional who can help you determine which documents you need in your estate plan, then create the necessary paperwork to set up a trust for your estate. Although it is technically possible for you to prepare your own trust, it is certainly not advisable.
A trust attorney goes far beyond the basics, digging deeply into the circumstances of your life to determine the best estate plan for your needs and goals. Your trust attorney will help you understand the different types of trusts, guiding you to the trusts that will accomplish your objectives. The Long Island trust attorneys from Davidov Law Group can assist you in finding a professional fiduciary to serve as your successor trustee to handle the management of your trust should you become incapacitated or in the event of your death. This is a significant responsibility, often better left to a trained professional than to a friend or family member. A trust attorney can also do the following:
- Ensuring all state and federal laws are complied with
- Litigating any contests to the trust
- Managing the trust estate including reconciling outstanding debts, reporting gains and losses, and filing tax returns
- Notifying all beneficiaries
- Distributing assets to beneficiaries
- Notifying Social Security, Veterans Affairs, the Department of Health, life and health insurance companies, credit card companies, banks, and mortgage holders
There are many benefits associated with trusts and only a few issues could be perceived as disadvantages. There is more paperwork and more initial cost associated with trusts. After creating a trust, assets must be retitled into the trust’s name. There are no immediate tax benefits associated with most trusts, although some trusts do offer some level of tax benefits at the time of the grantor’s death.
Assets may not be beyond the reach of creditors unless an irrevocable trust is used. Trusts can be difficult to understand, although modern trusts are much clearer than they once were. Since a trust can be administered without the supervision of the court, it is necessarily longer than a will. In the end, however, if you have experienced Long Island trust attorneys from Davidov Law Group who can guide you through the process, a trust can be a good way to accomplish the tasks you want to accomplish with your estate plan.
What Are the Different Types of Trusts?
Testamentary trusts are created through a will and do not go into effect until your death—that is, they have no power until your will is probated. Testamentary trusts do not allow for the avoidance of probate but can be used to accomplish many planning goals. Inter vivos trusts—living trusts—are in effect throughout your lifetime and can benefit estates of any size, allowing for efficient distribution of assets and remaining outside of probate. Beyond this, trusts can be further broken down as:
- Revocable or Irrevocable Living Trusts—These are the most common type of trusts, and those most people are familiar with. These trusts may be known as a revocable trust, revocable living trust, irrevocable trust, or irrevocable living trust. A revocable trust is one that can be altered or revoked at any time during the grantor’s life. When a revocable living trust is set up, the assets of the grantor must be re-titled into the trust. Most people are the trustee of their trust until their death or incapacitation, at which time, a named successor trustee takes over. The creator of a revocable living trust maintains control over all his or her assets that are in the trust. An irrevocable living trust cannot be altered or revoked. Irrevocable trusts tend to protect assets from creditors better than revocable trusts and have certain tax benefits.
- Special Needs or Supplemental Needs Trust—A special needs or supplemental needs trust is usually set up for the benefit of a special needs child or adult. This type of trust allows a disabled person to maintain eligibility for governmental benefits like Medicaid while enhancing the person’s quality of life by paying for items Medicaid does not cover. Depending on the type of special needs trust chosen, Medicaid may be able to recover money from the trust—up to the amount of Medicaid expenditures—following the death of the beneficiary.
- Medicaid Protection Trusts—A Medicaid protection trust is an irrevocable trust that plans for future nursing home costs. The transfer of assets to the Medicaid trust triggers the five-year lookback period for Medicaid nursing home eligibility, however, does not affect community-based care (home care) Medicaid benefits since the lookback period is only one month. The senior—who is also the grantor, cannot serve as trustee or manage the trust assets and no principal distributions can be made to the grantor. This ensures the assets in the trust are protected from Medicaid or other government trusts. In the state of New York, if the grantor’s primary residence is held in the trust, the grantor remains eligible for the enhanced STAR, senior citizen exemption, and veteran’s exemption, so long as he or she has the right to lifetime use of the property. The Medicaid Asset Protection Trust can be a very useful planning tool, particularly for those who are reluctant to simply give their assets outright to their children or grandchildren.
- Irrevocable Insurance Trusts—An irrevocable life insurance trust is created to own and control a term or permanent life insurance policy while the insured is alive. This type of trust can also be used to manage and distribute the proceeds paid out of a life insurance policy when the insured dies. Irrevocable life insurance trusts can minimize estate taxes, avoid gift taxes, protect government benefits, and can be a useful component of legacy planning.
- Family LLPs—A family limited liability partnership is an arrangement under which two or more family members pool money to run a business. Each member can buy shares in the venture for potential profit. Family LLPs are often established to preserve a family’s generational wealth as they allow for tax-free transfers of assets, real estate, and other wealth.
- Charitable Trusts—A charitable trust is essentially a way you can set up your assets to benefit you, your beneficiaries, and a charity, all at the same time. A charitable trust can offer many financial advantages using non-essential assets such as stocks or real estate.
- QPRT—A qualified personal residence trust is a specific type of irrevocable trust that allows the creator to remove a home from their estate for the purpose of reducing the amount of gift tax incurred when assets are transferred to a beneficiary. The owner of the residence can live on the property for a period of time with ‘retained interest.” Because the owner retains only a fraction of the value of the home, the gift value of the property is lower than fair market value.
- SLAT—A spousal lifetime access trust is an irrevocable trust that is utilized for transferring wealth outside of an estate. SLATs allow the opportunity to take advantage of the current federal exclusion prior to its expiration on December 31, 2025. A SLAT can provide the donor with limited, indirect access to the trust assets.
Trusts primarily benefit those who implement them in the following ways: they help protect assets, manage taxes, and provide specific risk mitigation strategies.
How to Select the Best Trust Attorneys for You and Your Family
The Long Island trust attorneys at Davidov Law Group have a goal of helping families prepare for the future. With more than twenty-five years of experience, we can help you understand the best route to pave the way for your beneficiaries and to protect your legacy. We have an in-house CFP with a depth of experience in financial matters. We believe in building strong relationships and understanding all your goals before we make recommendations. For more information on trusts and other estate planning procedures, read our book—“Keeping it in Your Family—Protecting Your Family and Leaving a Lasting Impression.”
How Davidov Law Group Will Protect Your Family and Preserve Your Legacy
The Davidov Law Group provides attention to detail as we secure your legacy. We are a family-owned firm that wants to help other families plan for their future in the best way possible. Few firms have the depth and breadth of experience you will find at Davidov Law Group. We have protected more than 2,500 families and we can do the same for you. Contact the Davidov Law group today.