Articles Posted in Living Trust

Living-Trust-2-300x200A typical estate plan includes a number of commonly recognized documents.  First and foremost is a Last Will and Testament.  As discussed in many posts in the New York Probate Lawyer Blog, a Will controls the disposition of assets held in a decedent’s name alone.  Thus, assets such as joint bank accounts or items which have designated beneficiaries such as retirement accounts and life insurance pass directly to the other named party.  The terms of a Will do not control these assets.  Therefore, any estate plan should include careful scrutiny as to the title of assets and whether named beneficiaries have been added.

When a person dies, his Will is filed with the Surrogate’s Court along with a petition for probate.  When a Will is admitted to probate by the Court, the terms of the Will become effective.

It has become more popular recently to include the creation of a Living Trust as part of an estate plan.  Living Trusts are also referred to as grantor or revocable trusts.  The basic format of a Living Trust is that assets owned by a person in their names are presently transferred into the trust.  Thus, real estate is placed in the name of the trustee of the trust as well as bank accounts and other items.  The intention is to put a person’s assets into a Living Trust in order to avoid probate.  When a person dies, the terms of the trust can be effectuated expeditiously without having to wait for the probate process to be conducted in the Surrogate’s Court.  Also, the Living Trust can have provisions for the management of property if the grantor becomes ill or disabled.

There are a number of different ways in which a person can dispose of assets after death.  Creating a Last Will and Testament is a traditional vehicle for a person to transfer his estate to estate beneficiaries.   A Will controls all assets that are owned by a decedent in his individual name at the time of death.  This document can provide details regarding the amounts and the manner of bequests.

Another possible estate planning document is a Living Trust or Revocable Trust.  This trust is created during a person’s lifetime and assets are transferred into the trust during the life of the Grantor.  When a person dies with a Revocable Trust, the successor or remaining trustee distributes or holds the trust fund in accordance with the terms of the trust.  However, unlike a Will, which needs to be filed with the Court for probate, there is no public record of the trust.  As a result, potential beneficiaries of the decedent’s estate cannot immediately see whether they were named in the trust.  Also, it is difficult to determine whether the trust was created or funded under circumstances that may involve undue influence or other wrongful acts.   The New York Probate Lawyer Blog has published numerous articles concerning Living or Revocable Trusts.

A person who has questions regarding the validity of a lifetime trust can commence litigation to void the trust.  There are possible proceedings whereby an estate fiduciary, such as executor or administrator, can investigate the circumstances under which the trust was put into place.  It is not uncommon to see trust litigation especially when the terms of the trust document are different from a Last Will that was previously signed by the decedent.

Living Trusts in New York present a number of beneficial options for a person’s Estate Planning. The basic planning and Advanced Directive documents begin with a Last Will, Health Care Proxy and Living Will and Power of Attorney. However, these papers may not meet all of the needs in a particular situation.

For example, a Last Will can provide for the disposition of a person’s assets in many different ways through provisions for bequests of stated monetary sums, or the specific devise of particular real estate, or a gift of a percentage of the estate. Also, a Last Will can create testamentary trusts to take advantage of estate tax planning methods or provide protection for minor children or beneficiaries who are incapacitated. However, in order for a Last Will to become validated and effective it must be filed with the Surrogate’s Court and admitted to probate. The Probate Process is typically not a barrier to a smooth estate settlement particularly where all of the interested parties involved are close family members and there is no antagonism between the parties. Unfortunately, there are many situations where conflict and complexity may hinder or interfere with probate.

A Living Trust may be used to avoid some of the Probate issues and other lifetime problems which are identified below. These items include the following:

(a) Identification of distributees (next of kin) – when a Will is offered for probate the New York estate laws and rules provides that the Court be given specific details regarding a person’s next of kin. Determining this information may be difficult particularly in situations where the decedent has not had contact with any family members for decades and may have been born outside of the United States. I recall one situation where a person who was preparing their estate plan had been brought up in foster care and had no knowledge as to his biological family. The administration of a Living Trust does not require the identification of next of kin. Upon the death of a decedent the Trustee of the trust is typically authorized to distribute the trust assets to the trust beneficiaries without any Court proceedings or any search for, or notice to, the decedent’s living heirs. The provisions for distributions under the Trust would be exactly the same as set forth in the Last Will.

(b) Avoidance of Will Contests – since the administration and distribution of trust assets does not require identifying or notifying next of kin or the commencement of a Surrogate’s Court Probate Proceeding, it is less likely that a disgruntled heir will challenge the validity of a decedent’s trust or estate plan. It is rather easy for an unhappy disinherited individual who received a notice of the Probate Proceeding to file Objections to Probate with the Court. While the validity of a Living Trust can be challenged, the person who wishes to do so must take an affirmative step and prepare Court papers and commence a new Court lawsuit to discredit the validity of the trust. Thus, a Living Trust may avoid the Contest of a Will.

(c) Management of Assets in the event of disability or incapacity – A Living Trust allows the Trustee to manage assets both before and after the death of the trust creator. A Living Trust is created during the lifetime of the creator and assets are transferred into the trust at that time. While the creator is usually the trustee of the trust, trust provisions can provide for a substitute trustee in the event the creator becomes disabled or incapacitated. This type of provision allows for a more comprehensive method to handle a person’s assets in the event of a disability. While a power of attorney can also be used to accomplish this task, the trust provides a more centralized and structured approach and reduces the problems associated with having a bank or other financial institution raise questions regarding the power of attorney. While banks and other financial institutions are now required to accept and follow the instructions of an appointed agent under a power of attorney [New York General Objection Law Section 5-1504 (2) and 5-1510(2)(i)], there are occasions where difficulties still arise. Additionally, by creating a lifetime advanced directive for asset management in the case of disability, on Article 81 Guardianship Proceeding may be avoided.

New York Estate Attorneys are familiar with the various benefits that provisions in a Living Trust can provide. Since each individual’s needs and intentions are different it is important to explore the possible advantages provided by including this type of trust in an estate plan. Not every situation calls for a trust, but when necessary, a Living Trust can expedite estate administration and avoid the time and expense of lengthy Court proceedings.

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