Trusts

A trust is a legally enforceable arrangement in which you (the trust creator) appoint one or more people or an institution (the trustee—can be you or someone else) to hold and manage and/or invest certain of your assets (the principal) for the present and/or future benefit of someone else or of an entity (the beneficiary or beneficiaries).

The trustee has the legal responsibility to follow your instructions on how to manage and distribute the trust assets, whether the trust lasts for a limited number of years or for the entire lifetime of a beneficiary or beneficiaries. With extremely few exceptions, a trust must be created in a written document similar to a will.

When you intentionally create a trust with respect to property that you own or have a future right to own, you create what is called an express trust. There are two types of express trusts most commonly used in estate planning: living trusts and testamentary trusts:

  • A living trust is one that operates while you are alive and benefits specific people, such as you during your lifetime, and after you die, your wife, your children and/or grandchildren, or friends by providing, for example, income, use of property (like a car) or a place to live (the trust can pay mortgage and taxes). You do not have to make yourself a beneficiary of your living trust.
  • A testamentary trust is one that you create as part of your will, and it begins operating after you die.

A special type of express trust is commonly used to care for someone with an extreme mental or physical disability:

  • In a supplemental (or special) needs trust, you create a plan and framework to provide for the needs of a mentally and/or physically disabled person who has long-term healthcare and social service needs.

Another feature of a New York trust can be used to help mentally disabled people, as well as those who cannot manage money well or who have many creditors. You may worry that this type of beneficiary will squander, be duped out of trust income or principal or simply give it to bill collectors:

  • A spendthrift trust can shield the trust from creditors and financial predators. When you create this type of trust, you ensure that the trustee retains tight control over the principal and can go so far as directing the trustee to determine the beneficiary’s income needs so that the trust only releases amounts required for living. In addition, you can arrange it so the beneficiary has no ability to assign the trust assets to creditors, who therefore have limited collection options given the limited income given to the beneficiary.

Why would I create a trust?

A trust can serve many purposes, including estate planning, tax planning, medical planning and charitable giving. All give you the opportunity to control how some or all of your property and assets will be managed and distributed during and/or after your life. Unlike a will, which becomes operative only after you die and by which you generally just give property away, you can establish an operating trust that manages and distributes your property while you are alive and then continues doing so after you die. Also, property that you place into a trust does not have to go through the time-consuming (and public) probate process, as is the case with property you distribute by a will (unless the trust is created in your will).

In the case of a supplemental (or special) needs trust, you get to ensure that someone in need of special medical attention is cared for during and/or after your life.

What can I put into a trust?

You can put anything that you own into a trust. This includes money, bank accounts, stocks, bonds, real estate, houses, vehicles, furniture, artwork, jewelry, writings and the like. If you are going to own something in the future, you can put your future interest into the trust. Your retirement accounts can name your trust as a beneficiary. There are certain types of trusts into which you can deposit a life insurance policy. The bottom line is there isn’t much that you can’t put into a trust.

What do I do with the property I want to put in the trust?

When you create a living trust, you must deliver the principal or some of the principal to the trust:

  • If the principal is a house, you must execute a new deed and deliver it to the trust.
  • If the principal is a car, you must transfer the title to the trust.
  • If the principal is a bank account, you must assign power of attorney over the account to the trustee and transfer the bank account to the trust.

When you create a testamentary trust, the principal is delivered to the trust as part of your estate after your will is probated.

If I put my assets into trust, do I still need a will?

Yes. It is nearly impossible to include all your assets in a trust, since throughout life, you continually acquire assets, some or most of which you may not want to include in a trust—in fact, you probably wouldn’t want to include most of your possessions in a trust—it is costly and time-consuming to deposit most property into trust. Therefore, it is important to have a will to distribute your remaining property after you die.

Can I amend or revoke a trust?

Yes, and under certain circumstance, even “irrevocable” trusts may be amended or revoked under New York law.

I would like to create a trust:

  • Determine who you want to provide for and for what needs you want to provide.
  • Gather relevant documents about the property you would like to place in trust.
  • Get in touch with an experienced estate and trust lawyer.

Changes may occur in this area of law. The information provided is brought to you as a public service with the help and assistance of volunteer legal editors, and is intended to help you better understand the law in general. It is not intended to be legal advice regarding your particular problem or to substitute for the advice of a lawyer.

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