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Types & Uses of Trusts

Will
Legal documents

Find the Right Trust

Trusts typically fall into one of two categories – testamentary or inter vivos. A testamentary trust is one created by your will and it doesn't come into effect until the time of your passing. With an inter vivos will, however, you create it now and it exists during your lifetime. To help determine which trust is right for you, call Mark G. Aberasturi, Attorney at Law today.

Inter Vivos Trusts

There are two kinds of inter vivos trusts – revocable and irrevocable.

Revocable trusts are often referred to as a living trust. With this, a donor maintains complete control over the trust and may amend, revoke, or terminate it at any time. This means you can take back the funds or change the terms anytime. This allows you to reap the benefits of the arrangement while maintaining the ability to change the trust anytime.

Revocable trusts are generally used for one of three purposes:

Asset management: Trusts permit the named trustee to administer and invest the trust for the benefit of one or more beneficiaries.

Probate avoidance: Upon the death of the person who created the trust, (the grantor, or "donor") the trust passes to whoever is named in the trust. It does not fall under the jurisdiction of probate courts, and the distribution won't be held up by the probate process. However, the property will be included in the grantor's estate for tax purposes.

Tax planning: Though the assets of a revocable trust will be included in the guarantor's taxable estate, it is possible to draft the will so that assets will not be included in the estate of the beneficiary – thus avoiding taxes when the beneficiary dies.

Irrevocable Trusts

These are trusts that cannot be changed or amended by the donor. Any property you may have placed into the trust can only be distributed by your trustee as provided for within the trust itself. For example, you may set up a trust under which you will receive income earned on the trust's property, but bars your access to the trust's principal. This is a popular tool for Medicaid planning.
Irrevocable trust

Testamentary Trusts

A testamentary trust is created by a will. This trust has no power or effect until the will is probated. Although this will does not avoid the need for probate and does become a public document of the will, it can be useful in your estate planning goals. The testamentary trust can be used to help reduce any estate taxes on the death of a spouse and can provide for the care of any disabled children.
Boy on a wheel chair

Supplemental Needs Trusts

If you need a trust to provide for the continued care of a disabled spouse, child, friend, or relative, you need a supplemental needs trust. The beneficiary of a well-drafted supplemental needs trust gains access to the trust assets for purposes beyond those provided by public health programs. This allows the beneficiary to not lose eligibility for benefits such as Supplemental Security Income, Medicaid, and low-income housing. These trusts can be created by the donor during his or her life, or as part of a will.
Supplemental needs trusts

Benefits of a Trust

Depending on your situation, there can be a several advantages to establishing a trust. Best known is the advantage of avoiding probate. In a trust that terminates with the death of the donor, any property in the trust prior to the donor's death passes immediately to the beneficiaries by the terms of the trust without requiring probate. This can save time and money for the beneficiaries.

Certain trusts can also result in tax advantages – both for the donor and the beneficiary. These are often referred to as "credit shelter" or "life insurance" trusts. Other trusts may be used to protect property from creditors or to help the donor qualify for Medicaid. Unlike wills, trusts are private documents and only those individuals with a direct interest in the trust need to know of trust assets and distribution, provided, they are well drafted. Another advantage of trusts is their continuing effectiveness even if the donor dies or becomes incapacitated.
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"Mark walked us through the entire estate and will probate proceeding in the Surrogate's Court and we received our inheritances in a lot less time than we thought. We had heard the estate and will probate proceedings in the Surrogate's Court were much more cumbersome."-

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