A comprehensive estate plan allows you and your family to feel financially secure and confident. A trust is the most important document at the foundation of that plan. An asset protection plan allows a family to rest assured that not all assets will be spent down on the cost of long-term health care. A trust is the most important document at the foundation of that plan too.
There are many different types of trusts in New York, each with a difference purpose and different end results. Read on to learn more about trusts, and how an estate planning law firm can help you establish a trust as a part of your overall plan.
Before we dive into the different types of trusts available in New York, let’s define what exactly a trust is when it comes to estate planning. A trust is a legal agreement authorizing a trustee to hold assets for the beneficiaries until the time when the beneficiaries shall inherit the assets.
Most people would benefit from establishing a trust, as trusts can meet a wide range of planning needs. A trust enhances your estate plan by not only avoiding the probate process, but by providing additional benefits, such as protecting assets from creditors, immature children, second marriages, and more. By working with an experienced elder law and estate planning attorney, you can determine the right trust for you.
There are many different types of trusts for a variety of estate planning purposes. A trust can assist in asset protection, avoiding probate, reducing estate taxes, protecting vulnerable beneficiaries, or even setting aside funds for charity.
Here are five common types:
Protecting assets is important to everyone, especially older adults, and an Irrevocable Trust is the cornerstone of asset protection. No one wants to needlessly spend down all of their assets to pay for nursing home care or other long-term care. By protecting assets in an irrevocable trust, you can become eligible for Medicaid benefits, including nursing home care, home care and, in certain circumstances, assisted living programs. By planning ahead with an Irrevocable Trust, you can ensure that you will qualify when you submit a Medicaid application without spending down your family’s assets.
An Irrevocable Trust set up for asset protection purposes can hold almost any type of asset, including your home, bank accounts, and investments. After five years have passed, the assets held in the trust are protected with respect to Medicaid for nursing home care. You would not have to spend down those assets on the cost of care, and instead the assets are protected and will be inherited by your beneficiaries.
A Special Needs Trust or Supplemental Needs Trust (SNT) can be established in your Will or as a living trust and is designed to provide for the continuing care of a child with special needs without disruption of government entitlement benefits, such as SSI and Medicaid.
Trust assets may be used to provide for items or services not covered by governmental benefits, such as computer equipment, vacations, special medical equipment, and home modifications. There are several types of SNTs (First Party, Third Party, Pooled Trusts) so be sure you meet with a knowledgeable attorney who practices in special needs planning, like the attorneys at Cona Elder Law.
If your estate might exceed the federal or New York estate tax exemptions, an Irrevocable Life Insurance Trust (ILIT) could save you tens or hundreds of thousands of dollars in estate taxes. This is because the trust owns the life insurance policy for you. You create the trust, select the trustee and designate the beneficiaries. Thus, you control the trust by creating a set of instructions the trustee must follow. The assets in this trust will bypass your estate and your spouse’s estate and go directly to your children (or whomever you name as the beneficiaries). This avoids estate taxes in both estates, saving a high percentage of your insurance proceeds.
A Revocable Trust allows you to transfer your assets to a trust while still maintaining complete control over them. This type of trust can be freely amended, modified, or revoked by you during your lifetime. At death, the assets will pass to the named beneficiaries of the trust.
A Revocable Trust is typically used to avoid probate, which is the court process of “proving” a last will and testament, a process which can lead to months of delays after your death. A Revocable Trust can be especially helpful if there are beneficiaries who may contest a Will or other possible inheritance disputes. It is important to note, however, that a Revocable Trust offers no asset protection. For that you need an Irrevocable Trust.
There are a few different types of charitable trusts, the most common being a Charitable Remainder Trust (CRT). A CRT is a life income gift in which you transfer assets now, receiving a charitable deduction for a portion of the transfer. Then, you or a beneficiary receive income (tax-free) for the rest of your life or a fixed period of time. At death, the principal remaining in the CRT passes to the charity. The primary benefit of a CRT is obtaining a present income tax deduction for a charitable gift that you still receive the income from during your life.
A Charitable Lead Trust (CLT) is a charitable trust set up so that the charity receives the interest from the gifted assets for a period of time. After that period has ended, the remaining assets pass to family members or other beneficiaries.
When it comes to creating the best type of trust to protect your assets, your loved ones, and your legacy, the dedicated trust attorneys at Cona Elder Law will work with you to develop a holistic plan so that your estate can be cared for according to your objectives. You’ll feel comfortable and confident knowing our knowledgeable and compassionate Estate Planning Attorneys on Long Island are your advocates working to protect your assets and your family.
Contact us today to get started.
Cona Elder Law is a full service law firm based in Melville, LI. Our firm concentrates in the areas of elder law, estate planning, estate administration and litigation, special needs planning and health care facility representation. We are proud to have been recognized for our innovative strategies, creative techniques and unparalleled negotiating skills unendingly driven toward our paramount objective - satisfying the needs of our clients.
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