A trust creates a vehicle that will hold certain assets. A trustee will then manage those assets on behalf of the beneficiary or beneficiaries of the trust. In estate planning, trusts are often used to pass assets directly to beneficiaries, thus avoiding the probate process. They’re also a good vehicle for ensuring that irresponsible or disabled beneficiaries will have money to live on even if they are not capable of managing an inheritance themselves. Before you make any decisions, speak with a qualified Long Island estate planning attorney.
Our experienced team at Schlessel Law PLLC can be your invaluable guide through the intricacies of establishing and managing irrevocable trusts. From preserving assets to minimizing tax implications, our legal professionals can provide personalized solutions tailored to your unique financial situation. Contact us at (516) 574-9630 to schedule a consultation and take the first step toward comprehensive and strategic estate planning.
An irrevocable trust may not be modified once created, except in very limited circumstances. Once assets are placed in an irrevocable trust they remain in the trust, and only the trustee may control them.
There are two types of irrevocable trust.
The irrevocable living trust is a trust in which the settlor re-titled each asset into the trust while they are still alive.
When you create an irrevocable testamentary trust you also create the trust while you’re still alive, but it is paired with a Will. The terms of the trust will only be activated once you die. The terms of the trust will be administered according to the terms of your Will. This still allows the trustee to transfer assets or control of assets to beneficiaries as appropriate.
Assets in an irrevocable trust may also be protected from lawsuits, judgments, or government agencies that might otherwise be able to attach to your assets.
Medicaid Asset Trusts are another type of irrevocable trust. These help you pay nursing home or other long-term care expenses in the event that you need such care. It can help you protect and exempt assets should you need to apply for assistance.
Trusts are not the proper vehicle to meet the goals of all estate planners. As your estate planning lawyers, we will only recommend this type of trust in the event that it is the proper vehicle to meet your needs, goals, and concerns.
Types of Irrevocable Trusts in New York
The first type of New York irrevocable trust is the Inter Vivos or irrevocable trust. In this type of trust, the settlor transfers assets into the trust while they are still alive. This is accomplished by re-titling every asset in the trust. The trust can be created and activated during the settlor’s lifetime. This type of irrevocable trust can be a great option because the assets do not need to go through the probate process in the event of the creator’s death.
Another type of New York irrevocable trust is the irrevocable testamentary trust. This type of trust is created during the settlor’s lifetime but is only activated after the settlor passes away. This means the trust has been created already, but it is activated only after the death of the settlor and administered according to the terms of the will. This type of irrevocable Trust is useful when you need to name a trustee who will manage or administer property and other assets for the benefit of minors in the future.
When creating an irrevocable trust in Nassau County or Suffolk County, it is important to seek the help of an experienced Long Island Trust lawyer to help ensure that your documents are correctly drafted. A skilled lawyer may also be able to give you invaluable advice on what type of irrevocable trust will work best for you and your family. Contact Schlessel Law PLLC today to schedule a consultation with an experienced estate planning lawyer on Long Island.
|Irrevocable Trust Type
|Irrevocable Living Trust
|A trust in which the settlor re-titles each asset into the trust while they are still alive.
|Irrevocable Testamentary Trust
|A trust created during the settlor’s lifetime, paired with a Will. The trust is activated and administered after the settlor’s death.
|Medicaid Asset Trusts
|Trusts designed to help pay nursing home or long-term care expenses and protect assets when applying for assistance.
How To Set Up An Irrevocable Trust In New York
Establishing an irrevocable trust in New York encompasses several key stages. Here is a general overview of the typical process:
- Define the Purpose: Begin by clearly defining the purpose for which you require the trust. This may encompass asset protection, tax planning, or ensuring financial support for a loved one with special needs, among other considerations.
- Select the Assets: Determine the assets you want to incorporate into the trust, whether they are real estate, investments, cash, or other properties.
- Choose a Trustee: Select someone with whom you have complete trust, as they will be assigned the crucial role of overseeing the management of the trust’s assets. This person may be a family member, friend, or a qualified professional like a lawyer or financial advisor.
- Identify the Beneficiaries: Clearly define the individuals or entities intended to receive benefits from the trust, and ensure their identities and respective shares are specified.
- Draft the Trust Document: Enlist the support of a dependable attorney, as they will compose the trust document tailored to your particular needs and circumstances.
- Fund the Trust: Legally transfer your selected assets into the trust as part of this step.
- Manage the Trust: The trustee takes charge of the trust’s assets, overseeing them in line with the conditions specified in the trust document for the well-being of the beneficiaries.
If you’re navigating the complexities of establishing an irrevocable trust in New York, consider consulting a skilled attorney first. At Schlessel Law PLLC, our experienced Long Island estate planning attorneys can guide you through the intricate process of setting up an irrevocable trust. From drafting the necessary legal documents to ensuring compliance with state laws, our team can provide invaluable support to help safeguard your assets and legacy. For comprehensive assistance in establishing your irrevocable trust, please contact us today.
What Happens to an Irrevocable Trust When the Grantor Dies
When the individual who established an irrevocable trust passes away, the administration of the trust generally remains unchanged. This is because the creator willingly relinquished control over the trust’s assets when it was set up, and in most cases, they are not allowed to act as the trustee of an irrevocable trust.
Since the assets in the trust are no longer considered the property of the deceased creator, creditors cannot access them. The trustee is required to obtain an employer identification number (EIN) from the Bureau of Internal Revenue for handling income taxes. After the creator’s death, the trustee continues to manage the trust according to the terms specified in the trust agreement.
In certain situations, the death of the creator triggers significant events within the irrevocable trust. For example, in a Qualified Terminable Interest Property (QTIP) trust, the trust is funded upon the creator’s death. The creator’s spouse becomes a beneficiary and receives income for their lifetime, while the children are named as remainder beneficiaries. The surviving spouse is unable to modify the trust provisions and is limited to receiving income from the QTIP.
In an irrevocable life insurance trust (ILIT), the trust receives death benefits from a life insurance policy upon the creator’s demise. The ILIT manages these benefits for the beneficiaries, providing liquidity for the estate. In the case of a grantor who is also a lifetime beneficiary in a charitable remainder unitrust, the creator’s death triggers the transfer of the remaining trust assets to the designated charitable beneficiary.
The timing of the creator’s death can affect the trust, as seen in grantor-retained annuity trusts (GRATs). If the creator passes away during the GRAT term, the estate retains the right to receive annuity payments, which are included in the creator’s taxable estate.
If the creator serves as the trustee of the irrevocable trust, a successor trustee named in the trust agreement will assume the responsibility of managing the trust and making distributions.
How Does an Irrevocable Trust Alleviate Gift and Estate Tax?
An irrevocable trust can be set up and funded to address estate and gift taxes. The trust assets will remain separate from your taxable estate if you give up all rights to income and principal from the trust. Giving up your rights to the income and principal means that you also need to give up the ability to modify the Trust.
Trust entities can hold a wide range of assets. These include real estate and financial accounts. The Trust can safeguard these assets against creditors and help alleviate estate tax consequences. Trusts are established by Grantors and then are managed by Trustees who can either be an individual or a company. These entities are responsible for preserving the assets in the best interests of the trust and income beneficiaries.
The trust terms include gifting and the trustee has significant gifting power for the benefit of the beneficiaries. These benefits include tuition payment, healthcare, maintenance, or welfare. The named beneficiaries may also be able to purchase a real estate property. These gifting arrangements will be in place so that the Grantor can take advantage of his or her annual gift exemption and lifetime exclusions.
Have you done your estate planning yet? Do you know whether your assets will truly serve your loved ones after you die?
If you haven’t, contact Schlessel Law. We specialize in elder law and estate planning, and we’re prepared to help.