Understanding and Navigating Trusts
Usually, people create a trust for their own financial purposes or to financially protect their family members. Many different types of trusts exist that can accommodate the different reasons people have. Let’s dive into it!
Trusts as Part of a New York Estate Plan
A trust is essentially a legal tool that allows a property owner to transfer assets to another party for the benefit of chosen individuals. The trustor (sometimes called the settlor) is the person creating the trust. They transfer assets to the trustee, who manages those assets on behalf of the beneficiaries—the people or entities the trust is designed to support.
In some cases, one person may serve in multiple roles. For example, a trustor may also act as the trustee. Likewise, in limited situations, the trustee can act as both the trustee and the beneficiary. But often, different people or institutions serve in each role to create oversight.
As part of an estate plan, a trust can be used to minimize estate taxes (for someone with high assets). But they offer other benefits, too, if well-crafted. A trust can keep your assets private even when you die because a trust does not need to go through probate, and probate is a matter of public record. A trust can also protect assets from creditors or help beneficiaries who cannot manage money well.
Whatever your priorities, whether it’s protecting your estate, supporting loved ones, or simplifying asset transfer, a carefully drafted trust ensures your wishes are carried out.
The Two Types Of Trusts: Which Is Right For You?
Specific types of trusts that people can use to protect their assets or pass their property on to someone else come in many forms. However, all of these trusts are either revocable or irrevocable.
Revocable Trusts
Also known as living trusts, allow the trustor to continue to alter the property in the trust. They can even revoke the trust completely. This gives the trustor far more control over their property. With that control, though, comes an issue: because the trustor still has access to the property in the trust they created, their creditors can often reach into the trust to satisfy debts owed to them.
Irrevocable Trusts
Also known as living trusts, allow the trustor to continue to alter the property in the trust. They can even revoke the trust completely. This gives the trustor far more control over their property. With that control, though, comes an issue: because the trustor still has access to the property in the trust they created, their creditors can often reach into the trust to satisfy debts owed to them.
Examples of Different Types of Trusts
Just to give you an idea of what types of trusts there are to address your specific needs, here’s a list of some of the most common.
- Asset protection trust
- Charitable trust
- Constructive trust
- Special needs trust
- Tax by-pass trust
- Totten trust
Trusts can also be customized to fit unique goals, such as providing for pets, preserving farmland, or transferring specific collections (like firearms or antiques).
What Are The Benefits Of A Trust?
As mentioned, trusts are especially beneficial to avoid probate and taxes. By using a trust (in addition to a will or in lieu of a will), assets of a trust pass directly to the trust’s beneficiary when the trustor dies. This process means the assets do not go into the trustor’s estate, they are transferred inter vivos, or between living people. As a result, certain estate taxes do not apply to trusts. Using a trust to pass property to your heirs can have tax advantages and can avoid the potential legal complications of dividing your estate or a contested will.
A trust also gives you the ability to create instructions and conditions for asset distribution upon your death, giving you control over your assets even when you are not here.
So, if you have a beneficiary whom you want to finish college before disbursement of funds or if you want only a certain amount of funds disbursed at different times in the beneficiary’s life, you get full control over deciding those things. You can identify a successor trustee: someone you know who can manage the trust according to the terms and conditions.
A trust ensures that your wishes extend beyond your lifetime, protecting your assets while also offering guidance and stability for those who rely on you. If you have further questions, feel free to contact us for more information.
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McAdoo Estate Planning Is Here for You
At McAdoo Estate Planning we focus on Estate Planning designed to protect your assets for you and your family. With thorough plans and detailed trusts, you can get peace of mind knowing your wishes will be honored.
Contact us today to get a personalized consultation and determine the best strategy for your estate planning needs.