The benefits of a Trust.
“Trusts are commonly mistaken to be reserved to wealthy elites. In reality, anyone can benefit from a trust to reduce taxation, avoid delays in succession, and prevent hefty legal fees for your beneficiaries after your death.”
A Living Trust ensures that your wishes are respected, eliminating any chance of contest between beneficiaries —those you name, and others that may appear out of the woodwork. With a Trust, you act as the Trustee until your death. This means you control your assets and can amend your Trust as you please. You can easily add/remove property and assets to the Trust, amend beneficiaries, and adjust your property's distribution as you desire. After your death, your “Successor Trustee” (e.g., an attorney, someone you trust, etc.) will administer the Trust the way you left it; the terms cannot be changed.
With a Living Trust, there is no need for your beneficiaries to seek probate and a judge's signature. To the contrary, your assets pass immediately to your beneficiaries, avoiding delays, public scrutiny, dispute amongst beneficiaries, and eliminating unwarranted claims to your estate. Some of your gifts might require that your Successor Trustee present a death certificate (e.g., financial institutions, Department of Motor Vehicles, etc.). In many instances, your beneficiaries take possession of their gifts upon your death without any added work. This is in stark contrast to a Will.
For added flexibility, residuary clauses can be inserted into your Trust. This ensures that even assets and property you do not specifically distribute (i.e., the wealth you acquire after your Trust was formed) pass to the person(s) you choose. Alternatively, or in addition to residuary clauses, a “Pour-Over Will” ensures that any unspecified property (the intestate estate) passes to the persons you choose and not to unwanted beneficiaries by intestacy (intestacy is the judicial process by which property passes without a Will, a Trust, or other binding declaration).
It is best to fund newly acquired wealth to your Trust on a regularly basis. By ensuring that you fund the Trust with all you property, you can avoid probate altogether and keep the extent of your wealth private. If you happen to leave items of nominal value to your residuary estate by failing to regularly fund the Trust, your intestate estate may qualify for special "small estate" probate procedures (or summary probate), which are faster, easier, and less expensive than the regular probate administration process. This expedited process can take place in New York for value less than $50,000, but keep in mind that this part of your estate will still become a public record because it is not part of your Trust. Both a Will and intestate administration (e.g., without a Will) must go to probate and thus become public. The only way to keep your estate completely private is to adequately fund your Trust and avoid probate entirely.
How does Estate Planning compare to a Will?
“Most people are unfamiliar with Trusts, and how they differ from Wills. While the cost of preparing a Trust tends to be higher than for a Will, the expenses of administering a Will exceed those of a Trust.”
In New York State, attorneys charge between $2,500 to $5,000 to draft Living Trusts. The cost can vary and increase depending on complexity, assets, and location of assets (i.e., multiple states).
Attorneys create Wills using standardized forms with the client and beneficiary information “filled in.” Simply put, Wills are cheaper to get and easy to make. Upon death of the client, however, the downside of basic Wills becomes evident very quickly as the probate process (the legal term for the administration of a Will) plays out. For example, many people are unaware that beneficiaries frequently spend upwards of $5,000 on attorney’s fees and probate costs, which can increase significantly depending on the estate’s size and complexity.
On the other hand, Living Trusts are efficient, practical, and ease the burden on beneficiaries. With my experience in Estate Planning, I can form comprehensive Living Trusts for my clients. I can create this trust with as many (or as little) beneficiaries as you wish, and fund it with all (or some) of your assets.
Should I have a Will, and can you prepare one for me?
My expertise goes beyond preparing Wills, and I often recommend not drafting one for several reasons. A Will has a variety of disadvantages, including a long probate period (in New York State, this is often 18 months or more), during which beneficiaries wait for a judge to finalize the decedent's succession and address the residuary estate (any property not explicitly listed in the Will).
If a Will does not include a Residuary Clause, the judge must distribute the residuary estate via the intestacy scheme (the judicial process by which property passes without a Will or a Trust) of the state where the Will was prepared. If any real property (i.e., a house or land) does not pass under the Will, the law of the situs (where the property is located) applies, further delaying the estate's administration and increasing legal and court fees.
Under a Will, the decedent's wealth and property distribution become public, and beneficiaries must pay substantial legal fees which can range from several thousand dollars at minimum and increase substantially depending on complexity. When a person dies with a Will (testate), notice must be given to all active and potential creditors, and all known and potential descendants. This invites contest and litigation.
The law that regulates Will administration is complex, and sometimes property is not distributed according to a testator's wishes, often due to improper construction of the Will, language conflicts, or the absence of strict specificity. For instance, New York State courts have found that disinheriting family members by omission or even with specificity (i.e., "nothing to my three nephews" or "only one dollar to each of my two nieces") is insufficient absent the allocation of all remaining property to other persons.
For example, the Westchester County Surrogate's Court requires that to cut off intestate rights, "There must be found in the will an intent to make a valid gift to other persons of the property which otherwise would pass as in intestacy."
Surrogate Courts elsewhere in New York State have upheld this standard, reiterating that a beneficiary’s rights, "Cannot be defeated except by a valid gift of intestate property to other persons." Your Will can therefore be inadequate in following your intent, particularly if you acquire property and accumulate wealth after the execution of your Will. As you can see, a Will is not as cut and dry as simply outlining who will get your assets.