New York Estate Planning & Elder Law Blog
When deciding how to disburse assets in an estate, many individuals decide to create a trust over a last will and testament in order avoid probate court and create a public record of the events. The pros and cons of establishing a trust over a will depend on many circumstances, including what type of trust the grantor chooses to create and what types of assets fall into that particular trust.
Living trusts
One category of trusts is the inter vivos trust, created while the individual is still alive. Two main types of inter vivos trusts exist, revocable and irrevocable trusts. Revocable trusts allow the grantor modify, amend, or otherwise change any aspect of the trust as he or she sees fit.
Irrevocable trusts cannot be amended and are controlled exclusively by the trustee. However, the grantor may still draw income from assets in the trust if the language of the trust allows for such transactions. These types of trust are often most useful for grantors planning ahead for Medicaid eligibility and avoiding possible penalties.
Whether you decide to put some or part of your assets into a revocable or irrevocable living trust, you should be able to avoid probate court and ensure a smooth transition of assets to beneficiaries. However, should you chose an alternative type of trust, your assets will still have to pass through probate court and could complicate the situation.
Testamentary trusts
The other trust category is a testamentary trust, sometimes known as a will trust” created through a last will and testament. Because this type of trust takes effect after the grantor passes away, the estate must still pass through probate. These types of trusts can be effective at lowering estate taxes for surviving spouses and other family members.
Furthermore, these trusts can be especially beneficial to manage assets for minor children after the passing of the parent. By placing assets in a testamentary trust, a trustee can manage the estate until the children become of age and capable of taking on and managing the assets.
The disadvantages of a testamentary trust include requirements from probate courts for trustees to check in regularly with the court to show proper management of the trust’s assets. Additionally, the trustee has no legal obligation to accept his or her role, which requires commitment throughout the entire duration and if the named individual does not accept the responsibility, the court will appoint one on the estate’s behalf.
Whichever type of trust you decide to place your assets in, it is important to evaluate all the circumstances of your case. With careful planning and consideration, you can find the best situation for your estate and family.