One of the most fundamental estate planning documents is the Last Will & Testament. In a Will, the creator, or testator, can appoint an executor to settle the affairs of the estate, which includes, among other things, paying expenses and distributing assets to beneficiaries. Notwithstanding all the directions that can be included in a Will, the Will must first be submitted to the appropriate Surrogate’s Court for approval before the executor has the authority to do anything. Probate is the legal process through which a Will is approved. A probate proceeding can be expensive and can take quite a while for the court to process. In addition to the time and expense, probate proceedings are a matter of public record and can be susceptible to legal challenges. These and other drawbacks lead many of our clients to ask the question: How do I avoid probate?
For those interested in avoiding probate, creating a trust is one of the best ways to do it. With a trust, the creator, or grantor, authorizes a trustee to manage the trust and its property, and the provisions of the trust guide the trustee in carrying out the management duties. The trustee’s authority automatically vests the moment the trust document is executed. The trustee need not wait for approval or any other actions by any court. So, if the trust directs the trustee to distribute trust property to beneficiaries following the grantor’s death, the trustee can immediately begin to make the specified distributions once the grantor passes away. In other words, there is no need for probate with respect to the trust assets.
There are many different types of trusts. Although each type of trust comes with the benefit of probate avoidance, the person’s needs and goals must be assessed to determine which type is most appropriate. If avoidance of probate is the sole objective, a Revocable Trust is a great option to consider. If there are additional objectives, like asset preservation, for example, an Irrevocable Trust may be advisable.
A Revocable Trust allows the grantor to retain more control over the trust and its property since the grantor can serve as the trustee, can amend or revoke the trust at any time and for any reason, and utilize the trust income and principle without restrictions. Because of the control retained by the grantor, the Revocable Trust generally does not offer asset preservation or protection.
With an Irrevocable Trust, the grantor cedes more control over the trust. The grantor cannot be the trustee and there are restrictions when it comes to accessing the trust principal. It is the restrictive nature of the Irrevocable Trust that allows it to serve as a vehicle to protect and preserve the grantor’s assets. The Irrevocable Trust, otherwise known as the Medicaid Asset Preservation Trust, is most often used to remove assets from a person’s name so the person can qualify financially for Medicaid in the event long-term care is needed.
If you are interested in better understanding your options for avoiding probate, or if you think your estate plan could benefit from the addition of a trust, you should consult with an experienced Elder Law and Estate Planning Attorney.
By Wayne R. Carrabus, C.P.A., Esq., at Futterman, Lanza & Pasculli, LLP with offices in Smithtown, Bay Shore and Garden City, NY, and clients throughout metro New York. He concentrates his practice on Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate and Estate Administration and Estate Taxes.