Benefits of a Trust

There are numerous advantages of establishing a trust as part of your estate planning such as avoiding probate and saving taxes. Since most people are unfamiliar with all the benefits of a trust and the various types of trusts, they usually consult with a NYC Estate attorney for advice and information. The attorney can make suggestions on how to save estate taxes and maximize your assets so that your beneficiaries inherit more of your assets.

Here are just some of the reasons why you may want to establish a trust:

Avoid Probate

Assets transferred to a trust are exempt from probate and transfer to the beneficiaries automatically. If you own real property in more than one state, say a co-op in New York and a retirement property in Florida, your family also avoids having to open a probate in New York and an ancillary probate in Florida. This means your family also saves money on the legal fees and other costs associated with establishing a probate. Your family will get to inherit their assets quicker because there will not be any Court restrictions imposed or delays in the transfer of your assets to them. Avoiding probate is the main benefit of a trust.

Keep Your Assets Private

With a probate, anyone can obtain a copy of your will, accountings and other probate records because they are part of the public Court records. A trust agreement is not subject to New York probate law and does not need to be filed with the Court. So only your beneficiaries and the trustee of the trust will have information regarding your estate assets, but not the general public or other curious family members such as your sister Daniel or your cousin Michael, who are not beneficiaries under the trust agreement.

Avoid Delays in Using Assets: Probate vs Trust

With a probate, it may be necessary to obtain Court approval to use certain assets. This is not the case with a trust because the Court does not have any say in how your trust assets are used and cannot impose any restrictions on their use or management, unless an interested party or heir has filed a trust litigation matter with the New York Surrogate’s Court.

Planning Ahead in Case You Become Incapacitated

Having a trust makes it easier for you and your family to plan ahead should you become physically or mentally incapacitated. You can designate a trustee to take care of your assets and to make other decisions regarding your financial affairs when you are no longer able to do so on your own. This way, your family doesn’t have to worry about having to establish a conservatorship or guardianship to manage your property.

Saving Taxes

One of the major benefits of having a trust is that it allows you to reduce your estate taxes. Currently, the federal estate tax exemption is $5,120,000, which is set to expire on December 31, 2012. As of January 1, 2013, the exemption will be reduced to $1,000,000, unless Congress decides to extend the current exemptions.


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Trust is a perfect estate planning instrument

So here is a good example of how you and your spouse can save taxes by establishing a Credit Shelter Trust.

A married couple establishes irrevocable trusts. After the death of the first spouse, the trust splits into two separate trusts, now referred to as Trust A and Trust B. Since the estate is worth $2 million, each trust receives $1,000,000. This is the amount of the federal tax exemption as of January 1, 2013. So Trust A will hold the decedent’s assets and the surviving spouse will receive the income from the assets. There is no estate tax due on the $1,000,000 in Trust A at the time of the decedent’s death because it exempt from estate taxes under the $1,000,000 exemption.

Trust B holds the remaining $1,000,000 in assets for the benefit of the surviving spouse. The surviving spouse is able to control Trust B assets. After the surviving spouse passes away, the assets in Trust B are transferred to the beneficiaries, who are typically the children, tax free because they are also within the estate tax exemption. The assets in Trust A will also pass to the children upon the death of the surviving spouse tax free because they are not included in Trust B belonging to the surviving spouse. So basically what has happened is your children have just inherited your $2,000,000 estate tax free.

New York Trust Lawyer

If you are interested in establishing a trust or need advice regarding an existing trust, it is recommended that you contact a New York trust attorney to assist you. Mike St. Pre is a top NYC estate planning lawyer who can assist with the preparation of the trust and other estate planning documents such as a will, living will, durable power of attorney and health care proxy. The attorney can also assist with other routine probate and estate tax matters as well as estate litigation, including a will contest, spousal claim, accounting challenge or the removal of a fiduciary.