Trust Attorney in New York City

Why You Might Need a Trust in New York

Most people have heard of trusts but assume they are reserved for the wealthy. That is a misconception. A trust is a legal arrangement in which one party — the trustee — holds and manages property for the benefit of another — the beneficiary. The person who creates the trust is known as the grantor. Unlike a will, which takes effect only after death and must pass through Surrogate’s Court, a trust can operate during your lifetime and continue seamlessly after you are gone, without any court involvement.

For New York residents specifically, there are several situations where a trust accomplishes things that a will simply cannot.

Probate avoidance. New York’s probate process through Surrogate’s Court is notoriously slow. Even an uncomplicated, uncontested estate in Manhattan typically takes nine to eighteen months to wind through the system. During that time, assets are essentially frozen. A properly funded revocable trust lets your successor trustee begin distributing assets and paying expenses within days of your death — no court filings, no waiting, no publication requirements.

Privacy. A will becomes a public document once filed with Surrogate’s Court. Anyone can walk into the courthouse and read the details of your estate, who your beneficiaries are, and what they received. A trust remains entirely private. For New Yorkers who value discretion — business owners, public figures, or anyone who simply prefers not to have their financial affairs on the public record — this is often the deciding factor.

Asset protection. Certain types of trusts shield assets from creditors, lawsuits, and the devastating cost of long-term care. A year in a Manhattan nursing facility can exceed $150,000, and Medicaid eligibility rules require most people to spend down nearly everything they own before the program will pay. An irrevocable trust, established with the right structure and enough lead time, can protect those assets while preserving your benefit eligibility.

Incapacity planning. A will does nothing for you during your lifetime. If you become incapacitated — due to stroke, dementia, an accident — a will cannot direct the management of your affairs. A revocable living trust, on the other hand, includes provisions for a successor trustee to step in and manage trust assets immediately, without the need for a guardianship proceeding in court. This is one of the most underappreciated benefits of trust planning.

Control over distributions. A will generally distributes everything outright and immediately. A trust allows you to control the timing, conditions, and manner of distributions long after you are gone. You can require that a child reach a certain age before receiving their inheritance. You can distribute funds in stages. You can give a trustee discretion to make distributions based on need, rather than handing a large sum to someone who may not be ready for it.

The trust attorneys at Law Offices of Vlad Portnoy, P.C. work with individuals and families across all five boroughs to determine whether a trust belongs in their estate plan and, if so, which type of trust fits their goals. Every situation is different, and trust planning is not one-size-fits-all.

Types of Trusts Under New York Law

New York’s Estates, Powers and Trusts Law (EPTL) recognizes a wide range of trust structures. Each serves a different purpose and carries different legal consequences for taxation, asset protection, and Medicaid eligibility. Understanding the options is the first step toward choosing the right approach.

Revocable Living Trust

A revocable living trust is the most commonly used trust in estate planning. You create it during your lifetime, transfer assets into it, and typically serve as your own trustee — maintaining full control over everything in the trust. You can modify the terms, add or remove assets, change beneficiaries, or revoke the trust entirely at any time while you have legal capacity. At your death, a successor trustee you have named distributes the trust assets according to your instructions, without any involvement from Surrogate’s Court. The primary benefits are probate avoidance, privacy, and incapacity planning. The trade-off is that a revocable trust provides no asset protection from creditors and no estate tax advantages, because you retain control of the assets.

Irrevocable Trust

An irrevocable trust generally cannot be changed or terminated once established. You transfer assets out of your ownership and into the trust permanently. In exchange for relinquishing that control, you gain meaningful benefits: the assets are removed from your taxable estate for New York and federal estate tax purposes, they are protected from your creditors in most circumstances, and they can serve specialized planning objectives such as Medicaid eligibility. Irrevocable trusts are the foundation of most advanced estate planning strategies for New Yorkers whose estates approach or exceed the state’s approximately $6.94 million estate tax exemption.

Testamentary Trust

A testamentary trust is created within a will and comes into existence only after the testator’s death. Unlike a living trust, it must pass through probate before it becomes operative. Testamentary trusts are frequently used by parents who want to ensure that assets left to minor children are managed by a trustee until the children reach a specified age — 25, 30, or whatever the parent considers appropriate. They also appear in second-marriage planning, where a testamentary trust can provide for a surviving spouse during their lifetime while preserving the principal for children from the first marriage. The primary drawback is that the will containing the trust must go through Surrogate’s Court, which introduces the same delays and costs that a living trust avoids.

Special Needs Trust (Supplemental Needs Trust)

Known in New York as a supplemental needs trust, this structure is designed for a beneficiary who has a disability and receives — or may in the future receive — government benefits such as Medicaid or Supplemental Security Income (SSI). These programs impose strict asset limits, often $2,000 or less in countable resources. A direct inheritance or gift to someone receiving these benefits can disqualify them entirely. A supplemental needs trust allows family members to set aside funds that supplement government benefits without triggering disqualification. The trustee uses trust funds for things like education, recreation, personal care items, and technology — needs that government programs do not cover. New York has specific statutory requirements for supplemental needs trusts under EPTL 7-1.12 that must be followed precisely for the trust to work as intended.

Medicaid Asset Protection Trust (MAPT)

A Medicaid asset protection trust is a specialized irrevocable trust designed to shield your assets — particularly your home — from being consumed by nursing home costs while preserving your eligibility for Medicaid long-term care benefits. The critical detail is timing: Medicaid imposes a five-year lookback period on asset transfers. If you transfer your home into a MAPT and apply for Medicaid within five years, the transfer triggers a penalty period of ineligibility. Once five years have passed from the transfer date, the assets in the trust are generally excluded from Medicaid’s asset calculations. You typically retain the right to live in the home during your lifetime. New York’s Medicaid rules, administered under Social Services Law, are among the most complex in the country, and a MAPT must be drafted by an attorney who understands both the trust requirements and the Medicaid program rules.

Irrevocable Life Insurance Trust (ILIT)

An irrevocable life insurance trust owns a life insurance policy on your life so that the death benefit is excluded from your taxable estate. Without an ILIT, life insurance proceeds are included in the value of your estate for estate tax purposes, which can push an otherwise non-taxable estate over New York’s exemption threshold. The ILIT is the owner and beneficiary of the policy. When you die, the trustee collects the death benefit and distributes it to your beneficiaries according to the trust terms — free of both estate tax and income tax. For New Yorkers with significant life insurance coverage, an ILIT can prevent hundreds of thousands of dollars in unnecessary estate tax liability.

Living Trust vs. Will: Which Do You Need?

This is the question trust attorneys in NYC hear most often. The answer depends on your assets, your family situation, and what you are trying to accomplish. Here is how the two tools compare on the factors that matter most.

Probate. A will must pass through Surrogate’s Court. A living trust does not. In Manhattan, probate routinely takes nine to eighteen months and costs 3% to 6% of the gross estate in fees, commissions, and legal costs. For a $1.5 million co-op apartment, that represents $45,000 to $90,000. A properly funded living trust avoids those costs entirely.

Privacy. A probated will becomes a public record. Anyone can access it. A living trust remains private — only the trustee and beneficiaries have a right to see its terms.

Incapacity. A will is useless during your lifetime. If you become incapacitated without a trust, your family may need to petition for a guardianship through the court — a costly, time-consuming, and public process. A living trust provides for seamless management by a successor trustee if you can no longer handle your own affairs.

Cost. A living trust costs more to establish than a simple will. But when you compare the upfront cost against the probate expenses your family will avoid, the trust typically saves money over the life of the plan. The real expense of a trust is not the document itself — it is ensuring that the trust is properly funded, which requires retitling assets and recording new deeds.

When a will is sufficient. For younger individuals with modest estates, no real property, and straightforward family situations, a will combined with a power of attorney and healthcare proxy may be perfectly adequate. The same is true for someone whose assets pass primarily through beneficiary designations — retirement accounts, life insurance, payable-on-death bank accounts — rather than through probate.

When a trust is the better choice. If you own real estate in New York (especially a co-op or condo), have an estate that may be subject to New York estate tax, want to plan for potential incapacity, have a blended family, or simply want to spare your family the burden of Surrogate’s Court, a living trust is almost certainly worth the investment.

In practice, most people who establish a living trust also need a “pour-over will” — a simple will that captures any assets not transferred into the trust during your lifetime and directs them into the trust at death. The pour-over will passes through probate, but typically with minimal assets and a straightforward process. Your trust attorney at Law Offices of Vlad Portnoy, P.C. will help you evaluate which combination of documents fits your circumstances during a free consultation.

How to Create a Trust in New York

Creating a trust in New York involves several distinct steps. Skipping or shortchanging any of them can undermine the entire plan.

Step 1: Define your objectives. Before any drafting begins, you need to identify what the trust should accomplish. Are you primarily concerned with avoiding probate? Protecting assets from Medicaid spend-down? Providing for a child with special needs? Reducing estate tax exposure? The answers drive every subsequent decision — the type of trust, the terms, the trustee selection, and the funding strategy.

Step 2: Choose the right type of trust. Based on your objectives, your trust attorney will recommend the appropriate trust structure. Some clients need a single revocable living trust. Others need an irrevocable trust alongside a revocable one. Married couples may benefit from separate trusts or a joint trust depending on their estate tax situation. This is where working with an experienced trusts lawyer in Manhattan pays for itself — the wrong trust type can create more problems than it solves.

Step 3: Select your trustee and successor trustee. The trustee manages the trust assets and carries out the trust terms. For a revocable living trust, you typically serve as your own trustee during your lifetime. But you must also name a successor trustee who will step in if you become incapacitated or after your death. Choosing the right person — someone organized, financially literate, and capable of maintaining objectivity with other beneficiaries — is one of the most important decisions in the process. For irrevocable trusts, the trustee is usually someone other than you from the outset, because retaining too much control can cause the IRS or Medicaid to treat the trust assets as still belonging to you.

Step 4: Draft the trust agreement. The trust document itself must be drafted in compliance with New York’s EPTL and must clearly articulate the trust’s terms: who the beneficiaries are, how and when distributions should be made, what powers the trustee holds, what happens if a beneficiary predeceases you, and how the trust terminates. Vague or poorly drafted provisions are the source of most trust disputes in Surrogate’s Court.

Step 5: Execute the trust. The trust agreement must be signed in accordance with New York law. Unlike a will, a trust does not require two witnesses under the EPTL, but it should be notarized. If real estate will be transferred into the trust, certain formalities at the deed level require notarization and recording.

Step 6: Fund the trust. This is the step that most people either skip or do incompletely, and it is the single most common reason that trusts fail to deliver their intended benefits. A trust is an empty vessel until assets are transferred into it. Real estate must be re-deeded into the trust name. Bank and brokerage accounts must be retitled. Business interests may require an assignment of membership or partnership interest. Law Offices of Vlad Portnoy, P.C. treats trust funding as an integral part of the engagement — not an afterthought for you to handle on your own — because an unfunded trust protects no one.

Common Trust Mistakes to Avoid

Our trust and estate attorneys regularly encounter trust plans that failed to deliver their intended benefits because of avoidable mistakes. Here are the most common ones.

Creating a trust but never funding it. This is by far the most frequent and most costly error. A client pays an attorney to draft a revocable living trust, signs the document, puts it in a drawer — and never transfers a single asset into the trust. At their death, every asset is still titled in their individual name and must pass through probate, exactly as if the trust never existed. The trust document itself is legally valid, but it is functionally useless. Real estate, bank accounts, brokerage accounts, and business interests must all be retitled in the trust’s name to receive any benefit.

Choosing the wrong trustee. A trustee is a fiduciary under New York law, subject to the duties and standards of the New York Prudent Investor Act. Naming your eldest child as successor trustee because they are the oldest, without considering whether they are actually capable of managing money and maintaining objectivity with siblings, is a recipe for conflict and potential litigation. The trustee must be someone who can handle the administrative, financial, and interpersonal demands of the role. When family dynamics are complicated, a corporate trustee — such as a bank trust department — may be the better choice, even if it costs more.

Failing to coordinate the trust with beneficiary designations. Retirement accounts, life insurance policies, and accounts with payable-on-death or transfer-on-death designations pass directly to the named beneficiary regardless of what your trust says. If your trust says your three children share everything equally, but your IRA names only your eldest child as beneficiary, the IRA goes entirely to the eldest. These designations must be reviewed and updated as part of any trust-based estate plan.

Using a generic trust template. Trust law is state-specific. A trust template drafted for California residents does not account for New York’s EPTL provisions, the state’s unique Medicaid rules, or the transfer tax and recording requirements for New York City real estate. Online templates also tend to omit critical provisions — spendthrift clauses, trustee succession, special needs carve-outs, tax allocation provisions — that a New York trust attorney would include as standard practice.

Waiting too long for Medicaid planning. A Medicaid asset protection trust must be established and funded at least five years before you apply for long-term care benefits. Clients who wait until a health crisis is already unfolding discover that the lookback period makes the trust ineffective. The time to establish a MAPT is when you are healthy and there is no immediate need for care — ideally in your 60s or early 70s.

Ignoring the tax consequences. Irrevocable trusts that generate investment income are taxed at compressed rates under both federal and New York law — the top federal bracket is reached at just over $14,000 of trust income. Without careful structuring and distribution planning, an irrevocable trust can generate a significantly higher tax bill than if the same income were earned by an individual. Your trust and estate attorney should work with your accountant to ensure the trust structure accounts for these realities.

Frequently Asked Questions