New York Estate Planning can involve many different issues and considerations. The New York Probate Lawyer Blog contains many posts discussing the need for Estate Planning papers such as a Last Will, Living Will, Health Care Proxy and Living Trust. Each of these documents should be prepared so that it reflects the intentions and desires of the creator.
A Last Will can contain relatively simple provisions for the disposition of estate assets. For example, the Will may say that the entire estate is to be given to the testator’s spouse if she survives him or if she does not survive then to the testator’s surviving children.
Of course, there are many circumstances when the provisions in a Will need to be more complex and there may be a desire to create a trust within the Will. Such a trust is called a Testamentary Trust.
A Testamentary Trust might be used for the purposes of establishing an estate tax plan where funds are placed into the trust so as to allow their exemption from taxation in multiple estates as provided by the estate tax laws. Other situations may call for a trust to be set-up to provide management and control of funds for someone who is a minor, or is improvident or for someone who is incapacitated. A Supplemental Needs Trust can be established where an incapacitated person is receiving governmental benefits such as SSD or Medicaid without causing these benefits to be diminished.
Whenever a trust is provided for there must be a Trustee or Trustees who are typically nominated in the document by the person creating the trust. The creator has the ability to define the powers that a trustee may exercise within the confines of the various estate and trust laws concerning these powers.
Trustees can be given broad discretion regarding investments and management of trust assets as well as the power to pay income and principal to the trust beneficiaries. Conversely, a trustee may be directed to use trust assets for a certain limited purposes or to advance a limited goal such as education for a beneficiary.
In view of the limited or broad authority granted to a Trustee, it is very important to both select the appropriate person or institution as a trustee and to define the trustee’s powers. Paying attention to these matters at the time the Will and Trust provisions are drafted is essential to ensuring that the creator’s intentions will be fulfilled after the trust is established and is operational.
New York Estate and Trust Lawyers are familiar with the many cases in the Surrogate’s Court where disputes arise between the trustees and trust beneficiaries concerning the management of the trust and the payment of trust income and principal. Most recently, Manhattan Surrogate Nora Anderson was presented with a situation where a trust beneficiary claimed that she was destitute and that the trustee of her trust was acting improperly by not making discretionary distributions to her to help her pay her rent and other expenses. In Hammerschlag v. Schlesinger, decided on April 17, 2013 and reported in the New York Law Journal on April 26, 2013, the beneficiary brought a proceeding in the Manhattan Surrogate’s Court to compel the trustee to make these payments and to remove him as trustee. The trustee sought to dismiss the proceeding by claiming that the trust provisions gave him “sole and absolute discretion” to make these decisions. The Court found that despite the trustee’s broad powers, the trustee has a duty to act in good faith and could not abuse his powers. Therefore, the Court scheduled a trial to determine whether the trustee acted properly.