When preparing an estate plan in New York, you have several options when it comes to the tools that are available for ensuring that your loved ones will be able to take possession your assets after your death. From simple wills to beneficiary designations on investment accounts and life insurance policies, these tools all serve different purposes, and in many cases have their own unique benefits and limitations as well.
In recent years, the estate planning tool known as the “revocable living trust” has gained widespread popularity for individuals of all ages planning their estates in New York. The revocable living trust offers several benefits, and in many cases it can serve as the primary document in a person’s estate plan. However, before you jump into forming a trust, it is important to understand how (and why) they work, and you should make sure that you have fully considered all of the other options that are available.
What is a Revocable Living Trust?
A revocable living trust is an estate planning tool that uses the trust structure to keep assets out of probate. A trust is a legal device created by a document that identifies three key roles: the grantor, the trustee, and the beneficiary. The grantor is the individual planning his or her estate; and, once the trust is established, the grantor transfers certain assets into the trust. Those assets then become the property of the trust, subject to management and control by the trustee. With a revocable living trust, the grantor will generally also be named as the trustee and beneficiary during his or her lifetime, allowing him or her to retain ownership, use, and control of the trust assets until death.
Upon the grantor’s death, the trust documents will designate both (i) who is to take over as trustee, and (ii) who will become the new beneficiaries of the trust. The trustee is responsible for administering the trust and managing the trust’s assets until they are distributed to the beneficiaries in accordance with the grantor’s final wishes (as set forth in the trust documents).
What are the Benefits of Using a Revocable Living Trust?
Revocable living trusts offer numerous benefits. Two of the most important benefits are:
- Flexibility
- The ability to avoid the probate process
Since these trusts are “revocable,” they can be modified or terminated at any time. In addition, once the trust structure is in place, you can continue to place new assets into the trust without needing to modify your estate plan. This level flexibility is largely unique among estate planning tools, especially when combined with the other benefits of a revocable living trust.
The other primary benefit is avoiding probate. Probate is the judicial (and public) process of winding up a person’s final affairs. Probate can also be time-consuming and expensive; and, for individuals with large and complex estates in particular, avoiding probate will often be a key component of the estate planning process.
What are the Limitations of Using a Revocable Living Trust?
Of course, revocable living trusts do have some limitations; and, when considering your estate planning options, it will be important to make sure these limitations do not outweigh the benefits of using a revocable living trust. If they do, you will need to carefully consider the alternatives, and you should work with an experienced estate planning attorney to identify the tools that make the most sense for your personal circumstances.
For example, depending on how you structure your revocable living trust, it may be somewhat of a cumbersome process to ensure that the appropriate assets get put into the trust over time. If an asset gets left out of the trust, it will transfer according to the terms of your will (in most cases, when you establish a trust you will also execute a back-up will to cover any non-trust assets). There can be tax and other considerations as well.
Schedule a Consultation with New York Estate Planning Lawyer William M. Finucane
The key is simply to make sure that you make informed decisions about the tools you use to build your estate plan. Attorney William M. Finucane has been providing estate planning services to New York residents for more than 30 years. If you would like more information about revocable living trusts and the other estate planning tools that are available in New York, call (518) 873-6351 or contact us online today.