Living Trust Frequently Asked Question

In New York , what is considered a living trust?

A trust is an arrangement under which one person, called a trustee, holds legal title to property for another person, called a beneficiary. You can be the trustee of your own living trust, keeping full control over all property held in trust.

A "living trust" (a living trust attorney may use the Latin term "inter vivos") is simply a trust you create while you're alive, rather than one that is created at your death under the terms of your will.

Different kinds of living trusts in New York , and creating one with the help of a living trust attorney can help you avoid probate, reduce estate taxes or set up long-term property management.

Why do I need to obtain a living trust attorney to draft a living trust?

With New York living trusts, the big advantage is that property left through the trust doesn't have to detour through probate court before it reaches the people you've designated to receive your inheritance.

In a nutshell, probate is the court-supervised process of paying your debts and distributing your property to the people who inherit it. Unfortunately, the average probate drags on for months before the inheritors get anything. And by that time, up to 5% of the property generally has been eaten up by lawyer and court fees.

Not everyone needs to worry about probate or retain the services of a living trust attorney. A short consultation with a living trust attorney should give you an idea if more extensive services are required.

How does a living trust attorney use a living trust to avoid probate?

In a New York living trust, property you transfer into a living trust before your death doesn't go through probate. The successor trustee -- the person you appoint to handle the trust after your death -- simply transfers ownership to the beneficiaries you named in the trust with the assistance of a living trust attorney. In many cases, the whole process takes only a few weeks, and there are no lawyer or court fees to pay. When all of the property has been transferred to the beneficiaries, the living trust ceases to exist.

Is it expensive for a living trust attorney to create a living trust?

A basic living trust isn't much more complicated than a will, and in some cases doesn't require the assistance of a living trust attorney. With a good self-help book or software program, you can create a valid Declaration of Trust (the document that creates a trust) yourself. If you run into questions that a self-help publication doesn't answer, you may need to consult a living trust attorney.

Living trust attorneys commonly charge upwards of $1,000 to draw up a simple trust. In New York , most people consider the size of their state and compare it to probate costs before hiring a living trust attorney.

Is it a hassle for people in New York to hold property in a living trust?

When a living trust attorney makes a living trust, it does require some crucial paperwork. For example, if you want to leave your house through the trust, you will be required to sign a new deed showing that you now own the house as trustee of your living trust. This paperwork can be tedious, but a living trust attorney can help make the process easier.

In the case of a living trust in New York , is the living trust document ever made public, like a will?

No. In New York , a will becomes a matter of public record when it is submitted to a probate court, as do all the other documents associated with probate -- inventories of the deceased person's assets and debts, for example. As a living trust attorney would tell you, the terms of a living trust, however, need not be made public.

Would a living trust prepared by a living trust attorney help protect property from creditors?

Unfortunately in cases of a New York living trust, a creditor who wins a lawsuit against you can go after the trust property just as if you still owned it in your own name.

After your death, however, property in a living trust can be quickly and quietly distributed to the beneficiaries (unlike property that must go through probate). By the time creditors find out about your death, your property may already have been dispersed with the assistance of a living trust attorney, and the creditors may not know exactly what you owned (except for real estate, which is always a matter of public record). It may not be worth the creditor's time and effort to try to track down the property and demand that the new owners use it to pay your debts.

On the other hand, probate can also offer a kind of protection from creditors. During probate, known creditors must be notified of the death and given a chance to file claims. If they miss the deadline to file, they may be out of luck forever.

If I make a living trust with the assistance of a living trust attorney, do I still need a will?

A living trust attorney will say yes. A will is an essential back-up device for property that you don't transfer to yourself as trustee. For example, if you acquire property shortly before you die, you may not think to transfer ownership of it to your trust -- which means that it won't pass under the terms of the trust document. Your living trust attorney will point out that in your back-up will, you can include a clause that names someone to get any property that you haven't left to a particular person or entity.

If you don't have a will, any property that isn't transferred by your living trust or other probate-avoidance device (such as joint tenancy) will go to your closest relatives in an order determined by state law. As your living trust attorney will tell you, these laws may not distribute property in the way you would have chosen.

Does a living trust drawn up by a living trust attorney reduce estate taxes?

A simple probate-avoidance living trust in New York has no effect on taxes. More complicated living trusts, however, can greatly reduce the federal estate tax bill for people who own a lot of valuable assets.

One tax-saving living trust used by living trust attorneys is designed primarily for married couples with children. It is commonly referred to as an AB trust, although it goes by many other names, including "credit shelter trust," "exemption trust," "marital life estate trust" and "marital bypass trust." Each spouse leaves property, in trust, to the other for life, and then to the children. Creating this type of trust with the help of a living trust attorney can save up to hundreds of thousands of dollars in estate taxes, money that will be passed on to the couple's final inheritors.