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There is a common misconception that as long as you have a will in place, your estate plan is solid. While a will can serve as the foundation of your plan, there are a number of tools you can utilize to protect your estate and loved ones. One of the most important estate planning documents you should consider establishing for your estate is a trust fund. Read on to learn more about the various types of trusts you may establish and the importance of working with a Puntman County trusts attorney to help you make the best decision for your circumstances.
What Is a Trust?
A trust fund is a legal arrangement that allows the creator of a trust (known as a trustor) to appoint someone (the trustee) to manage assets on behalf of the beneficiary, who will receive the assets. As such, these assets can be invested and distributed in accordance with the instructions left by the trustor.
Why Trusts Matter in Estate Planning
You should understand that, while many assume that trust funds are only for the wealthy, this is not the case. Many people in Putnam County, regardless of their income, can benefit from establishing this document. There are a number of reasons why someone may wish to establish a trust fund.
Common reasons include:
- Avoiding the tedious and complicated probate process
- Providing long-term financial support for loved ones
- Leaving a structured inheritance for children
- Managing property during incapacitation
- Working in tandem with other estate planning documents
- Controlling asset distribution over time
- Potential tax advantages
- Can provide asset protection (depends on the type of trust)
Major Categories of Trusts in New York
Most types of trusts will fall into one of two categories in Putnma County. Though similar, the differences between the two major types of trusts allow you to pick the best option for your unique situation.
Irrevocable Trusts
An irrevocable trust, as the name suggests, cannot be altered or changed after it is created and funded. This means that the terms and conditions of the fund, as well as the beneficiaries, cannot be changed in the future. Additionally, this kind of trust requires you to relinquish full control of the assets placed into the trust fund.
Key benefits of establishing an irrevocable trust include:
- Asset protection from creditors
- Long-term planning for heirs, including multi-generational planning
- Reduction of estate taxes (removes assets from your taxable estate)
Revocable (Living) Trusts
A revocable trust, also referred to as a living trust, allows you the benefit of controlling the assets held in the trust while you are alive. This means you can update the terms and conditions, beneficiaries, or trustee at any time.
Key benefits of establishing a revocable trust include:
- Minimizing/avoiding the probate process
- Flexibility to revoke or amend the fund as needs change
- Managing assets in the event of incapacitation
You should note, however, that establishing a revocable trust will not provide asset protection from creditors and does not remove assets from your taxable estate.
Common Types of Trusts Available in New York
Everyone’s situation is different. As a result, there are different types of trusts you can create.
Irrevocable Life Insurance Trust
This allows a trustor to remove their life insurance from the estate plan so the beneficiaries are free from any taxes that are placed on it.
Charitable Trust
There are two types of charitable trusts. A charitable lead trust (CLT) lets the individual’s choice of charity receive interest from the financial gift for a period of time. When the period ends, the remaining assets may go to other beneficiaries.
A charitable remainder trust (CRT) allows charities to receive the assets in a trust at the end of its term. Until then, the donor receives interest on the gift.
Special Needs Trust
This can be created for a loved one with a disability to make sure they receive the financial support they need throughout their life. Essentially, this prevents an individual with special needs from receiving an amount of assets that would disqualify them from necessary government benefits.
Additional Trust Options You May Consider
There are a considerable number of trust funds that you may find fit with your unique needs and estate plan in Putnam County. Other common forms of trusts you may want to consider establishing include:
- Spendthrift trusts: Protect from creditors and overspending
- Testamentary trusts: Created through a will and implemented after death
- Grantor Retained Annuity Trusts (GRAT): Beneficial for assets that increase in value
- Generation-Skipping trusts: Transfers to grandchildren to reduce estate tax
The estate planning process can feel overwhelming. Luckily, working with the right attorney can make all the difference. Reach out to our firm today to speak with an experienced and dedicated attorney. We are here to walk you through the process every step of the way.
How To Choose the Right Trust for Your Needs
As there are a considerable number of trust funds to choose from, it can be difficult to determine which one is best for you. In addition to working with an experienced attorney, the following factors may assist you in determining the best option for your needs:
- Asset protection needs
- Tax planning goals
- Whether you prioritize flexibility or permanence
- If you wish to avoid probate
- The long-term financial needs of intended beneficiaries
- Your unique family structure.
Our Putnam County Estate Planning Firm Is Here to Help
When you are planning your estate, working with an experienced attorney is in your best interest. At the Law Office of Andres D. Gil, PLLC, we can examine your circumstances and explore your options to help you make the most informed decision for your future. If you or a loved one needs assistance creating a trust fund, contact our dedicated legal team today.
