As an alternative to a Will as your primary estate planning document, you can establish a Trust during your lifetime. A properly drafted lifetime Trust can be part of an overall estate planning strategy to avoid the necessity of probating a Will. A Trust takes title to your property, while allowing you to continue managing your assets during your lifetime. It also allows you to name an individual to manage your affairs in the event of your incapacity as well as to settle your estate when you die. In addition, a Trust is a private document (unlike a Will) that does not get filed in the local County Surrogate’s Court.
Trusts
INTRODUCTION
TRUSTS FAQs
Trusts come in many different forms and serve multiple different purposes. Whether a trust is right for you depends on your particular circumstances. Here are some examples of different types of trusts.
A Revocable Trust holds property for you during your lifetime. You can revoke the trust and take back ownership of the property at any time that you choose. Revocable Trusts are sometimes used in the place of Wills in order to avoid the probate process.
An Irrevocable Trust cannot be revoked by the creator, but it allows the creator to have certain rights to the property transferred into the Trust. For example, an individual can transfer her house to an Irrevocable Trust and retain the right to reside there as long as she lives. Since the Trust is irrevocable, however, she cannot later reacquire the house, sell it, and keep the profits. Irrevocable Trusts are often used in Medicaid planning because anything transferred into an Irrevocable Trust five years before a Medicaid application is not counted as a resource of the Medicaid applicant.
Special Needs Trusts (SNTs) come in two different types: a First Party SNT and a Third Party SNT.
A Third Party SNT can be set up for the benefit of a disabled person by a third party. For example, a father may set one up for his disabled child in his Will, so that money will be available for the child’s care after the father’s death. A Third Party SNT does not affect the eligibility of the disabled child for governmental benefits, such as SSI or Medicaid. One of the advantages of the Third Party SNT is that the principal of the trust can be left to other family members after the disabled person passes away.
A First Party SNT is similar to a third party SNT in that it does not affect the eligibility of a disabled beneficiary for governmental benefits. In contrast to a Third Party SNT, a First Party SNT is set up with the disabled person’s own funds – sometimes from the proceeds of their personal injury settlement. In addition, funds left in the trust after the disabled person’s death must be used to pay off any lien Medicaid has for providing medical care during the disabled person’s lifetime.