Revocable Living Trust Lawyers in NYC, Helping Families Keep Their Assets Out of Probate
If you are interested in the various inheritance modalities available in the United States, you may have heard about the New York Revocable Living Trust. This alternative has interesting advantages. And in this article, we will explain all the details that you should know before making any decision.
We know that inheritance and trust laws can seem confusing. There are many concepts and different alternatives. Don’t worry; at Ortiz & Ortiz, our trust lawyers in New York City are ready to answer all of your questions.
Let’s start with the basics. There are quite a few legal concepts in the planning process that you should know before we go into detail.
What is a Trust?
The trust is an estate planning tool. It is an agreement between its creator, also known as the settlor, and the trustee. The trust is made to protect and manage the interests of the settlor’s estate. Then this estate passes to its beneficiaries after the death of the settlor.
Who Participates in the Trust?
- Settlor or grantor: they are the one who creates the trust agreement and puts their assets into the trust.
- Trustee: this is the person designated by the settlor to manage and distribute the assets properly among the beneficiaries and based on the will of the settlor.
- Beneficiary: is a person or organization that will receive goods or assets as indicated in the trust.
So, a New York revocable living trust is a written instrument created during the life of the grantor, that is, the person who establishes the trust. Below we will highlight some points that characterize it:
- The trust is effective during the life of the grantor, with respect to the assets that are placed in said document.
- The trust is not effective until it is financed with assets.
- A revocable living trust is distinguished from a testamentary trust that is part of a last will and testament. In the case of the latter, it only comes into force after the death of the testator (the drafter of the will).
A fourth important feature to mention is that the grantor of a revocable living trust retains the power to freely modify and revoke the trust. It also retains the power to reacquire its assets. And it differs from an Irrevocable Trust, in that the Grantor cannot modify or revoke terms without the express consent of the beneficiaries.
If you are considering starting the process to make a living trust, you must consider a relevant point. Please note that a living trust will be considered irrevocable unless you expressly provide that it is revocable. New York is one of the few states that allows the modification, amendment, or revocation of an otherwise irrevocable trust.
What Are Other Features of Revocable Living Trusts?
When people choose to have a revocable living trust, they generally opt for the plan of transferring as much of their assets as possible to the trust. But some assets do not qualify to be considered in this document, for example, life insurance, and retirement accounts.
Once the assets are in the trust, they are managed for your benefit while you are alive. The trust is administered by a trustee of your choosing. Then they appoint a successor trustee who will take over as trustee after their death. Once that has passed, the trustee continues to manage and protect your assets and then distributes them to your beneficiaries.
A living trust in New York allows you to completely avoid the succession of the assets that are in the trust. This is why most people choose to include as many assets as possible.
Succession is the judicial procedure in which a will is approved and put into effect. For this procedure, the court can take several months to approve the will, and the process also involves some expenses. You should know that none of the assets in the will can be distributed until the estate is concluded, which can leave your heirs in a difficult financial situation.
Do Trusts Have Advantages Over Wills?
Using a revocable living trust instead of a Last Will and Testament allows the grantor the following benefits:
- Helps avoid potential Last Will and Testament claims regarding probate court issues. Lack of proper will execution attacks is exceedingly difficult to overcome in probate court.
- A revocable living trust in New York protects the grantor’s privacy. Unlike a will, its provisions are kept private. A will goes through probate and becomes a public record. A trust is not disclosed to the public. Its beneficiaries, assets, and details remain completely private.
- You avoid the cost and time of probate proceedings and expenses such as court costs, legal fees, and executor fees (but there will be trustee fees).
- The assets in the Revocable Living Trust will be available for immediate distribution after the death of the Grantor, subject to ensuring that there are sufficient assets available to pay any estate tax. A properly drafted living trust addresses this problem by arranging what happens when a trustee resigns or dies and provides a simple mechanism for the successor trustee to take over.
- There are no gift tax consequences for transferring assets to the trust.
- Continuation of the asset management of the Trust’s assets in the event of disability of the Grantor/Beneficiary.
Are There Any Disadvantages to Using Living Trusts?
Just like all other estate planning documents, there are some downsides to using a living trust:
- You must transfer all of your assets, including title to any real property, to the Trust during your life; furthermore, any assets acquired during the existence of the Trust must be transferred to the Trust.
- The cost of having an estate planning attorney prepare a Revocable Living Trust is generally higher than the cost of preparing a Last Will and Testament.
- Legal fees will be incurred to amend or modify the Trust during its lifetime, and you will still need a last will (commonly known as a “discharge” will) in case there are assets that have not been transferred to the trust.
- There are no substantial income tax advantages to using a living trust. Living trusts do not avoid inheritance taxes. New York State applies wealth tax to properties that are valued at more than $ 2.06 million. And the federal government applies it to properties that exceed $ 5 million.
Who Should Consider Adding a Living Trust to Their Estate Plan?
Anyone could take advantage of a revocable living trust. Contrary to what might be commonly believed, an irrevocable living trust or revocable trust are not options only for the wealthiest among us. However, if you have an especially large or complex estate, it might make even more sense for you to consider this option.
- Anyone with property in more than one state should seriously consider transferring ownership of it to a living trust to avoid having to have more than one probate. For example, if you own a New York home as well as a Florida condo, you should consider transferring both residences to a living trust to avoid having your will probated in two states.
- Another case that clearly requires considering the use of living trusts is when your family members are distant relatives. In such a case, not only will the executor of the estate in New York named in your will (or the attorney you hire) have to demonstrate “due diligence” in locating all family members, but they must also prove that one or more of them cannot be located.
- Following the previous point, in the event that distant relatives cannot be found, the executor will have to obtain something called a “Publication Order”. This will involve spending hundreds or possibly thousands of dollars on one of those legal advertisements that no one reads. All to notify these people of their possible interest in the estate, regardless of whether or not you named them in your will. Consider that all of that cost will be funded by the estate itself, thus decreasing the total pot to be distributed to your heirs.
- In addition, the substitute court must appoint an attorney as a “guardian ad litem” to protect the interests of these individuals and to investigate whether the will is valid. All of these costs will come at the expense of your heirs, and this lengthy process can substantially delay when someone can expect to receive your inheritance.
- With an irrevocable trust, all of the property in the trust, plus any future increases in the property’s value, cannot be subject to estate taxes. This is not true for assets placed in revocable trusts in New York. Federal estate taxes and state estate taxes still apply. But with both trusts, you can avoid probate.
- If you already anticipate that someone may have an interest in contesting your will, having a living trust can help you avoid litigation for your future heirs. It is not foolproof, but it avoids the immediate need to involve family members who may decide to cause trouble.
In short, except for the simplest inheritances (that is, all is left for the surviving spouse), we recommend that you consider making a living trust.
How Does New York State Law Affect Trusts?
New York law establishes mechanisms in your bylaws that allow the creator of a trust to modify or revoke an irrevocable trust. The additional thing is that, under certain circumstances, a trustee can invade a trust and transfer trust assets to a newly drafted trust with different terms.
New York law states that:
- If a settlor obtains the acknowledged written consent of all interested parties in an irrevocable trust, they may amend or revoke the writing. With these consents, a settlor can exercise this authority to enforce the title of the trust itself. He may also otherwise alter the provisions of the trust text as originally contemplated. “All interested beneficiaries” are the beneficiaries of the trust, that is, those who receive money and capital from the trust.
- New York State also allows a trustee to modify the terms of an irrevocable trust using the back door approach. This means transferring trust assets to a newly drawn-up trust. New York statute allows a trustee, who has absolute discretion to invade a trust for the benefit of an income beneficiary, to assign the assets of the trust to the trustee of another trust. And include it in a newly drawn up trust, so long as the following conditions are met: The fixed income interest of any income received is not reduced. The exercise is in favor of the beneficiaries of the trust. Designating the trust assets to a new trust does not diminish the trustee’s liability for failure to exercise reasonable care, nor does it increase the trustee’s commissions.
- Following the previous point, the advantage here is that a trustee can take action if the above conditions have been met without the consent of the creator of the trust, or if the creator has passed away. The use of this power by the trustee can be extremely helpful when a client is faced with an old trust that is inadequate in its creditor protection provisions.
Given the flexibility in New York to revoke and amend irrevocable trusts, perhaps it would be a good idea for all clients to review their trusts to make sure they still carry out their intentions. Thus, in case the circumstances have changed or if the trust was written badly, they may consider modifying it.
What Tasks Must a Trustee Perform?
When it comes to estate planning for your assets, properties, and bank accounts, you need to know the importance of the trustee’s role.
The role of the trustee in New York is as follows:
- Manage the assets of the trust during the life of the settlor (person who creates the trust) and after the death of the settlor, as long as the terms of the trust state that it should still exist. This is a huge responsibility that involves making long-term property management and investment decisions.
- Manage bank accounts for the trust.
- Maintain records of the trust.
- Pay the bills.
- Distribute the trust assets, money, and property in accordance with the terms established in the trust, at the time indicated for their distribution. This may include making payments on behalf of the beneficiaries, as well as directly to them if indicated in the trust.
Do You Need the Help of an Estate Planning Attorney?
In the digital world, many estate planning professionals post announcements and writings related to revocable living trusts. The problem is that, quite often, they can exaggerate the advantages of using certain estate planning documents over others.
All estate tax planning that can be implemented through the use of a revocable living trust can also be carried out through the use of a will. For example, the use of Credit Protection Trusts can be implemented in a will.
The Revocable Living Trust does not completely eliminate the need for a will. As we mentioned earlier in this article, even if you have a living trust, it is recommended that you have a will. It is highly unlikely that you transferred all of your assets to a living trust prior to your death, creating the need for a will to transfer assets that are only in your name at the time of your death.
Speak to a Living Trust Attorney at Ortiz & Ortiz, LLP
We know that for many people, planning the distribution of their assets is an issue that generates anxiety. All the legal details that are important to consider for a correct distribution of all your assets must be taken seriously. Especially deciding between the different options allowed by the laws of the United States, and which ones suit your goals the most.
At Ortiz & Ortiz, LLP, we have lawyers experienced in inheritances, trusts, and successions that can help you throughout the process of your estate planning. We will attempt to aid you and your family by advising you on the trust option most appropriate to your needs, guiding you in the drafting of the trust, accompanying you throughout the planned distribution of your assets, and helping your family through the steps after you are gone.
Our law offices are located in Queens and Manhattan. But we can help you through a virtual consultation in any of the five boroughs of New York. Contact us to set up a consultation, our attorneys are ready to review your case at 917-920-6437.