Specific Trusts That Could Strengthen Your Estate Plan
First, you will have to decide whether you want the trust to take effect during your lifetime (living trust) or after your death (testamentary trust). A living trust is active while you’re alive, but a testamentary trust is part of your will and only starts operating after you pass away. Both kinds of trust have a great deal of flexibility. For example, you could create a living trust that terminates upon your death or one that continues to provide for your grandchildren or even great-grandchildren.
There are many types of trusts in New York, but the most popular include:
- Revocable Trust. In a revocable trust, you are the settlor, trustee, and beneficiary—allowing you to maintain total control over the trust assets while you are alive. You can also amend the terms of the trust or revoke the trust at any point during your lifetime. The trust document designates the successor trustee who will manage and distribute the trust assets after your passing and successor beneficiaries who will inherit the remaining assets. Revocable trusts work in much the same way as a will, except trusts do not go through probate, saving your heirs time and money.
- Irrevocable Trust. An irrevocable trust avoids probate and passes assets to your heirs through a successor trustee. However, there’s one crucial difference: you cannot be the trustee of an irrevocable trust. You will have to appoint a third party to take complete control of the trust assets immediately. The advantage of permanently relinquishing control over these assets is that they can no longer be counted as “your” property, so creditors cannot claim them.
- Asset Protection Trusts. A Medicaid Asset Protection Trust (MAPT) is an irrevocable trust used to preserve Medicaid eligibility that pays for nursing home care. Five years after assets are placed in the trust, the government cannot count them toward your available resources. The assets in the trust are also exempt from Medicaid liens after your death, allowing you to receive Medicaid benefits and pass your wealth on to your beneficiaries.
- Pooled Income Trust. Just as an asset protection trust helps you meet Medicaid’s resource requirement, a pooled income trust helps you meet its income requirement. Medicaid recipients can only earn a small income each month without losing their benefits. A pooled income trust is managed by a charitable organization and holds any extra income over the Medicaid limit. During your lifetime, the money in the trust can be used to pay for certain permitted expenses related to your care. When you pass away, the remaining trust funds go to the charity.
- Spendthrift Trusts. Some trusts are created for specific and limited situations, like the spendthrift trust. These trusts limit the funds distributed to certain relatives who have trouble managing their finances, gambling problems, or several creditors. In addition to ensuring the beneficiary doesn’t receive too large a sum at once, these trusts can schedule disbursements at significant life events (such as marriage) while protecting the bulk of the assets from divorce or lawsuit judgments.
- Pet Trusts. A pet trust names a guardian and provides funds to care for your beloved pet after your passing. In New York, a pet trust terminates after 21 years or when no living animal is covered by the trust, after which the remaining trust balance is passed to named beneficiaries.
Let Us Explain Your Estate Planning Options
When we know what you hope to achieve before and after your passing, we can help you choose which one is right for you. Contact Landskind & Ricaforte Law Group, P.C., today through our online form or call us at 718-333-5007 to learn how we can be of assistance.