Manhattan Living Trusts Lawyers Guiding Clients Through the Steps to Protect Their Legacy
Living trusts are essential to estate planning and can offer many advantages to trustors and beneficiaries. However, it is crucial to understand how living trusts work, how to choose the right type of trust for your estate planning goals, and why working with an attorney to create your trust may be the right move. Learn the answers to these questions and see how an attorney can help you decide if a trust is right for you.
How Does a Living Trust Work?
A living trust is a key component of estate planning that allows the trustor or grantor (the person creating the trust) more control over how their assets are distributed to their named beneficiaries (the individuals receiving trust assets) after the grantor’s death. In simple terms, a trust works similarly to a container or a bank account for your assets.
For example, suppose you own a few assets, such as a vacation home and a few vintage cars, as well as financial assets, such as a savings account. When planning your estate, you would want your vacation home to be transferred to your spouse, while the vehicles should go to your brother or sister, and the savings account should go to your son or daughter but not until they turn 25 and can responsibly handle their finances. If you only have a last will and testament, all of these assets would be immediately transferred to your heirs upon completion of the probate process. A trust allows you more flexibility and control over how and when your assets are distributed.
What Are the Most Common Types of Living Trusts?
Trusts are categorized into living trusts and testamentary trusts. A living trust is created and funded while the trustor is still alive, whereas a testamentary trust is created after the trustor dies and is usually part of the trustor’s last will. Living trusts can be revocable or irrevocable – a revocable living trust can be changed or canceled at any time. In contrast, an irrevocable living trust cannot be easily changed or canceled without the consent of its beneficiaries.
There are many different types of living trusts. No matter how unique your estate planning goals may be, there may be a type of trust that precisely suits your needs. For example, if you have a loved one with special needs, you can create a special needs trust to ensure they can live comfortably after you pass away and still qualify for government benefits. If you are worried about losing part of your estate to creditors, you may consider creating an asset protection trust to shield your estate from creditor attacks. If you want your beneficiaries to receive life insurance proceeds without exposing them to taxes or debtors, an irrevocable life insurance trust may be right for you. The best way to choose a living trust that aligns with your estate planning goals is to speak to a skilled trusts attorney.
What Are the Advantages and Disadvantages of Having a Living Trust?
There are several advantages to having a living trust – and a few disadvantages you need to be aware of. One of the most significant advantages of a living trust is probate avoidance. Assets in the trust are usually distributed directly to the beneficiaries, which means you can avoid probate.
Another advantage of a living trust is that it allows the trustor to have more control over the distribution of trust assets. For example, if you wish to leave some money for your nephew but are afraid that he would spend it all frivolously, you can create a spendthrift trust and add a stipulation to the trust terms that only allow your nephew to access the money once he gets married, has children, or goes to college. Finally, living trusts may sometimes reduce your estate’s tax exposure.
There may also be a few disadvantages – the most obvious one is the need to fund the trust and manage it during the trustor’s lifetime, meaning there may be higher upfront costs and more work involved with the creation of a living trust when compared to a last will. However, many people feel that the advantages a trust can bring make the initial investment worth it in the long run. As always, it is best to speak to an attorney to understand how trusts work, their pros and cons, and any associated costs before deciding whether a living trust is right for you.
Do I Need an Attorney to Create a Living Trust?
If you are interested in creating a living trust, you may be wondering if you need an attorney to help you with this process – after all, there are so many do-it-yourself resources online that may allow you to create a trust by yourself with a few clicks. However, this approach is hardly the right one because only an attorney can provide crucial advice and make personalized recommendations based on your unique needs and estate planning goals.
And that’s not all – most online tools only offer off-the-shelf solutions and little to no support, so you may end up with a trust arrangement that has errors and may not work as intended. An attorney can help you design an error-free trust and assist you with the process of funding it, choosing your beneficiaries, and appointing a trustee. In the long run, taking the time and investing in professional help to create your trust will almost certainly pay off and allow you to preserve your inheritance for the next generation.
At the Law Offices of Vlad Portnoy, P.C., our attorneys are ready to guide you through the process of drafting a trust that fits your needs and answer any questions you may have. Contact our law office in Manhattan at 516-518-8586 to schedule a consultation and learn more.