A "living trust" is simply a trust created while you're alive, rather than one that is created at your death, under the terms of your will. It is a written document, signed by the trust maker and a notary public. The person who creates the trust is called the "grantor." A "trust" is a written instrument under which one person, called a "trustee," holds legal title to property for another person called a "beneficiary."  The property in the trust is called "trust assets." The trustee follows the instructions in the trust document describing how to manage and give out trust assets and how long the trust lasts. The document must list the property in the trust, name a trustee, and name who gets the property when the trust maker dies.

After the trust document is signed, the trust maker must transfer any property he or she wants covered by the trust into the trust.  For many items, this requires simply including a list of property with the trust document. However, titled property (like real estate) must be retitled in the name of the trust.  One can put money, real estate, stocks, bonds, vehicles, boats, furniture, art, jewelry into a trust.  Your retirement accounts, such as IRA's, which cannot be placed in the trust, can name your trust as beneficiary.

Revocable Trusts

A revocable living trust can be revoked by the grantor of the trust at any time, in whole or in part.  And you can name anyone as a beneficiary, including yourself. One often establishes such a trust to avoid New York's complex probate process and the related costs and delay. Probate is the legal process that inventories and distributes a person's property after death. Such a trust is also helpful as a management tool in the event that the grantor becomes incapacitated, as it may help preclude the expense and effort of establishing a guardianship or conservatorship.


Irrevocable Trusts

An irrevocable trust, unlike a revocable trust, cannot be revoked by the grantor and the granter cannot be the trustee.  The trust not only avoids probate, but is a vehicle for protecting assets while qualifying for Medicaid coverage for nursing homes, adult day care services and the like. Medicaid currently has a five year "look back" rule. This means the trust assets cannot be reached by Medicaid after they have been in the trust for five years. "Look back" is not an all or nothing proposition.  For example, if three years pass and the individual needs nursing home care, the family would only have to pay privately for the two years left before Medicaid eligibility begins.

Important Facts

1. A living trust gives one privacy that is not an option when you use a will. A will passes through probate and becomes public record. A trust is not revealed to the public and your beneficiaries, assets, and specifics of the trust remain completely private.

2. Living trusts do not avoid estate taxes. New York applies estate tax to estates that are valued over $2.06 million and the federal government applies it to estates in excess of $5 million.

3. Even if you create a living trust, you still need a will.  A “pour-over will” (it “pours over” into the living trust) provides that any asset you failed to properly transfer into the name of your trust, passes to the trust to be disposed of as you directed in your living trust. For example, if you acquire new property and don't add it to your trust before you die, that property won't pass under the terms of the trust document. A will provides a backup plan for any property that doesn't make it into your trust.  You can use a will to name someone to inherit property that you haven't left to a particular person or entity in your trust. If you don't have a will, any property that isn't transferred by your living trust or other method will go to your closest relatives as determined by New York state law.  A pour-over will is executed AFTER you sign your living trust (this is very important under New York law).

4. Court challenges to living trusts, like challenges to wills, are rare. But if there is a lawsuit, it's generally considered more difficult to successfully attack a living trust than a will. That's because your continuing involvement with a living trust after its creation (transferring property in and out of the trust, or making amendments) is evidence that you were competent to manage your affairs.

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An attorney can help protect your right to keep and distribute your property as you choose. They can help you to create a trust that avoids probate, precludes conservatorships and provides privacy a will cannot. And they can ensure that your trust is valid and complies with the formalities required by law.