New York Estate Planning & Elder Law Blog
There are a number of complex issues involving the creation and administration of a trust. One of these issues involves which state’s laws should apply to the trust’s administration.
The best estate planning lawyers often discuss with clients the differences between available estate laws so the best possible results can be reached. During this critical phase of estate planning, it is important to have a number of estate planning issues in mind, which include the following.
The Role of Non-Resident Trusts
Trusts that are created under state law outside a person’s home state are referred to as nonresident trusts. Even nonresident trusts, however, can be administered under the state laws where a person resides if: issues concerning the validity of the trust, questions about the terms of the trusts, or uncertainty about whether the trust is lawful and legitimate arise.
As a result, to make the most out of nonresident trusts, it is absolutely vital that a trust be properly created.
Numerous Issues that arise at a Person’s Death
A will must be construed under the laws of the state in which a person resides at the time of the death no matter where a person lived when they signed their will.
If an individual passes away owning property over which another state has an interest, a will often must be probated in that state relative to that property.
The Difference that State Laws Can Make
The exact state law that you select can influence how an estate administered. Some of the advantages provided by the best state trusts laws include:
- Trusts can last through a number of generations or even indefinitely
- Trusts can provide a number of different types of protection from creditors
- A trustee can modify an irrevocable trust without a state court’s approval
- Assets can sometimes be allocated to new trusts
- Some laws limit the liability of trustee to just assets in the trust
- Some trusts establish different trust advisors and committees
- Some trusts can be created so that no income taxes are paid
An experienced estate planning attorney can help you review the various laws that might come into play when making estate planning decisions.
A Special Note about Trust Taxation
Taxation issues involving trusts are often particularly complex. Trusts which are required to pay income tax on the undistributed net income are referred to as nongrantor trusts, while trusts that pass income tax liability to another individual are referred to as grantor trusts.
If you reside in a state without any income tax and your main incentive in creating a trust was to reduce taxes, a nonresident trust might not be of much interest to you. To determine the exact tax issues that will come into play with your trust, it is a wise idea to speak with a knowledgeable estate planning attorney.
Speak with an Experienced Estate Planning Lawyer
If you have questions or concerns about the estate planning process, you should not hesitate to speak with a knowledgeable attorney. Contact Ettinger Estate Planning today to schedule a free initial case evaluation.