A living trust, which can be revocable or irrevocable, is established during the creator’s life and governs the management and distribution of your property during life and upon death. Like a will, a living trust names your beneficiaries and the properties you have chosen to give to them. In this article, we explain New York living trusts and answer questions you may have about the suitability of living trusts versus a will.
A New York Living Trust
A Living Trust is a legal relationship created in writing or by deed that is undertaken by a grantor of property or property owner where the owner transfers his property into a trust. A grantor creates a living trust when he transfers the property under a trust agreement during his lifetime. The property under a trust agreement is to be managed for the benefit of the chosen beneficiaries which can include the owner while he is alive.
Here, you appoint a trustee of your choice to manage the property, and then, appoint a successor trustee to manage the property after your chosen trustee passes on. The trustee can be you, an independent trustee, or an institution.
The successor trustee manages the properties of the trust and transfers the proceeds from it to your beneficiaries without courts or any administrative body’s involvements. The great thing about creating a revocable living trust is that you can make changes to it at any time before death or even revoke it entirely.
In contrast, a Will only becomes effective upon the death of the creator. This means that before a will can be acted upon, it must be admitted to probate. Probate is a procedure during which the Surrogate’s court admits a will as the last testament of the creator.
A living trust allows you to make provisions that completely avoid the probate process for your assets in the trust. This, in essence, is what makes a living trust completely advantageous over a will. Most times, it is preferable that property is transferred under a living trust to escape the probate proceedings which can be lengthy and costly with details of your assets and disposition of them completely public.
How to Create a Living Trust
If you want to make a living trust, you’ll need to create the trust document stating the persons who will benefit from the property during your life and will eventually inherit the trust property upon your death. You need to name a trustee of the estate on behalf of these persons, and it can be more than one trustee. You’ll also need to make provisions for the succession of Trusteeship.
In creating the trust, the properties get transferred to the named Trustees in their capacity as Trustees. These named Trustees will be the ones managing the properties and assets contained in the Trust for the benefit of the beneficiaries. The trust document needs to get signed and acknowledged before a notary public for it to become a valid living trust under the law.
The Benefit of Choosing a Living Trust Over a Will
As stated earlier, probate is a court-supervised process where a will is approved to become effective. This probate process can take between 3-6 months; it is expensive because it attracts executor fees, attorney fees, and court charges. A living trust, unlike a will, does not need to undergo this process.
Also, none of the assets in a will can be distributed until the probate process is complete and the debts of the estate and the decedent get paid before anything is being distributed to the beneficiaries. This is likely to pose financial constraints to beneficiaries under the will because they cannot access proceeds from the assets until the completion of the probate process. With a living trust, beneficiaries can access the gains from the estate immediately after the trust is executed and, in some cases, avoid payments of the decedent’s debts.
Do I Benefit from Having a Living Trust in New York?
A living trust can be a great alternative to a will. Just like a will, a living trust when made will direct the distribution of property upon death. Also, just like a will, the depositions from a living trust can be modified at any time before death.
However, unlike a will, a living trust also makes provision for you to manage your property either by yourself or by anyone else you appoint in the course of your lifetime, especially during the times you might be declared mentally incapable or incapacitated.
When you create a living trust, you have total control over your property. You can change or revoke the trust at any point unless it is an irrevocable trust which can be modified under the New York decanting statutes but cannot be revoked.
A living trust provides for the management and distribution of property after the death of the owner and allows for property distribution without a cumbersome process. This is because, under a living trust, a successor trustee can deal with the property almost immediately without the need for court approval. This process is done entirely privately and without any public disclosure of your affairs. This is unlike a will where probate, a public proceeding can only be gotten after fulfillment of specific legal requirements and procedures.
Does a Living Trust Help Me Avoid Conservatorship?
Yes. A living trust protects against trust property mismanagement during the settlor or grantor’s lifetime. This is necessary to protect against situations where the owner of the property may become mentally incapacitated, or subsequently lack legal capacity while alive. If this happens, a successor trustee that had already been appointed by the owner immediately takes over the property without interruption. This way, property wastage, trespass, or misuse is mitigated.
Continuation of Management Upon the Owner’s Demise
A living trust, unlike a will, provides for the continuation of property management even after the death of the trustee or owner. This way, provision is made under the living trust for smooth succession from one reliable hand to the other, chosen by the creator of the trust and not by the default state law provisions.
This is unlike a will where the executors of a will can only function after the death of the testator. If the executors under the will cannot function as a result of any form of incapacity, additional costs are incurred to appoint a successor executor. A living trust, as opposed to a will, rules out some costs associated with implementing successorship provisions.
In What Ways Does a Living Trust Serve its Purposes?
Using the instrument of a living trust saves the grantor money that would have been spent on probate; provides for asset protection of grantor’s assets during his or her life; and provides for the most efficient way to transfer wealth to the next generation.
One distinguishing factor between the administration of a living trust and a will is the issue of confidentiality. A living trust is very private in nature; it does not go through the probate process and the bureaucracy that comes with it. A will is typically in the public domain, and its confidentiality cannot be achieved.
It is only in circumstances where a living trust is being contested that it becomes subject to the trial process in an open court. However, the possibility to contest a will is much higher than that of a living trust agreement, and the trust instruments are often used to make sure that potential for contest is avoided altogether.
How Can a Living Trust be Used to Displace the Need for a Will?
A will is not the only instrument that can be used to pass on properties to one’s heirs. This can be done more efficiently through a living trust without utilizing a will.
A living trust should always include provisions that provide for the transfer of your properties directly to your heirs after you die. You can also continue your living trust after you die for the benefit of your heirs for multiple future generations. While the trust continues for future generations, the assets in it protected from the creditors and spouses of the beneficiaries.
What are the Similarities and Differences between a Will and a Living Trust?
A will specifies the name of the beneficiaries to your estate. It clearly states who gets what. The living trust also has this feature. It clearly states the names and descriptions of the beneficiaries, along with the details of the estate. With this in place, there is no ambiguity as to who the beneficiaries are and the property in question as the living trust covers all details.
It is common knowledge that a minor cannot benefit under a will; the living trust salvages this situation by vesting adults with the responsibility of managing the property in trust for the minor in their fiduciary capacity as trustees. This has the effect of preserving the interest of the minor in the property irrespective of the age. You can also provide for a trust for a minor in a will; however, such trusts are subject to the jurisdiction of the surrogate’s court and typically are terminated much sooner than the living trust which can continue for the life of the children.
The grantor/property owner can adjust both a will and a living trust at any time before his death. This feature is common to both of them even though there exist some differences to the procedures to make those changes.
A will can easily be contested in court. However, a living trust offers more protection and strengthens the intent of the grantor because, by its nature, it cannot be easily contested in court when compared to a will.
What are the Differences in the Execution of a Will and a Living Trust?
One significant difference is that a notary public must acknowledge signatures of the grantor and trustee of a living trust. Since most living trusts are done with the assistance of an attorney, it tends to add more credence and authenticity to a living trust. In contrast, a will requires two witnesses that are not beneficiaries. It is also recommended that those witnesses sign Affidavits attesting to the testator’s capacity and circumstances under which the Will was executed.
Do I Need A Living Trust?
There are three main reasons why you should consider establishing a living trust:
- To ensure your asset distribution directions are followed after your demise.
- A living trust leaves no room for doubt as to how you want your assets distributed and quashes any conflicts that may arise. This is because a trustor [?]in a living trust establishes the trust when he is healthy and of sound mind.
- If your beneficiaries are minors, a living trust helps you keep your assets from court-supervised guardianship. Minors cannot benefit under a will, but in a living trust, the trustee holds the assets until they come of age.
If you’re considering making a living trust over a will, your decision should be evaluated in the light of your assets and estate plan. The criteria for this consideration would include; the possibility that those you leave behind might contest the property, the complexity of the estate, preservation of confidentiality and privacy of your estate, need for elder law planning, having minor beneficiaries or beneficiaries who are unable to manage their financial affairs, the need for tax planning and the current situation with your creditors.
The living trust makes you analyze and rectify certain factors that would only come up under the will after death. This step of undertaking a living trust gives you that sense of fulfillment that you have taken steps in the right direction to ensure your family is in order and adequately taken care of, consequently avoiding troubles, challenges and crises after you may have departed this world.
If you need advice before deciding on whether to go for a will or living trust, please contact our office to schedule a consultation. The process of drafting, executing and funding a living trust is challenging; it is advisable to hand it to people who are well-versed and successful at structuring a trust that would address your concerns.