New York Trusts

A trust is a useful tool to provide restrictions on when or how money that you give as a gift during your lifetime is spent. Similarly, a trust created in your Will may provide instructions on who receives the trust assets, and restrictions on when or how the money is spent. This is useful in various circumstances, especially if the beneficiaries are minor children.

The person who creates a trust is called the “grantor”of the trust or the “settlor” of the trust.

A trust may provide for payment of income or distributions of trust assets to beneficiaries of the trust. The distributions may be specified in the trust, or may be determined in the trustee’s discretion. The trustee holds the trust property and is legally required to follow the provisions of the trust regarding the use of the trust property for the benefit of the beneficiaries.

A trust can be created during the donor’s lifetime (inter vivos trust) or in your Will (testamentary trust) The “grantor” or “settlor” or “creator” is the person who creates the trust The “trustee” is the person named in the trust to manage and distribute the trust assets. The trustee has a “fiduciary duty” to follow the terms of the trust document, and to manage and distribute the assets of the trust for the benefit of the beneficiaries.

Testamentary Trust

A Testamentary Trust is created by the terms of the grantor’s Last Will and Testament (“Will”). Therefore, the Testamentary Trust becomes effective when the person creating the trust dies. At any time prior to the grantor’s death, the grantor may change his or her Will, and therefore may modify the terms of the Testamentary Trust, or eliminate the Testamentary Trust entirely. The validity of a Testamentary Trust depends upon the validity of the Will that creates the trust. Therefore, if the Will was not properly drafted or executed, and is held invalid by the Surrogate’s Court, a Testamentary Trust created in the Will is also invalid.

We strongly recommend that a New York Will be drafted by an experienced New York Wills, Trusts & Estates lawyer, and that the Will be executed under the supervision of a New York Wills, Trusts & Estates lawyer. This will help ensure the validity of the Last Will and Testament, as well as any Testamentary Trust created in the Will.

Living Trust

A Revocable Living Trust (also known as an “Inter Vivos Trust” or “Family Trust”) is created during the lifetime of the “grantor.” The Revocable Living Trust may be changed at any time by the grantor, who may even cancel the trust and retake ownership of the trust assets. In a Revocable Living Trust, the grantor is often the trustee during his or her lifetime, and may also be a beneficiary. The Living Trust contains directions to the trustee regarding the management and distribution of the trust assets.

Unlike assets owned by a decedent at the time of his or her death, assets of a Revocable Living Trust do not require a probate or administration proceeding. Therefore, the assets of a Revocable Living Trust may be distributed to the named beneficiaries after the grantor’s death without a probate or administration proceeding. Therefore, a living trust may enable the decedent’s trust beneficiaries to avoid the substantial delays and fees incurred in probating a Will in the New York Surrogate’s Court.

If all of the decedent’s assets are held by a Living Trust, a Surrogate’s Court proceeding would probably be unnecessary. However, since many people who have a Living Trust also own some assets in their name, it is generally recommended that a Will also be executed, in order to state the decedent’s instructions for the distribution of any assets that are not held by the trust or owned jointly with another person. If there is no Will, any assets not held by the trust or owned jointly with another person, would be distributed in accordance with the laws of intestacy. Since this result may not be what the decedent intended, it is generally recommended that a Will be executed, in addition to a Revocable Living Trust.