Many individuals often wish to draft a “simple” last will and testament in order to take care of the disposition of their assets upon their demise. They do not want a complicated estate plan that necessitates the execution of myriad documents with numerous instructions. Sometimes a simple will is effective and can adequately address an individual’s estate planning needs. However, it is often preferable to have assets held in trust rather than in the individual’s name outright.
Assets held in a living trust will avoid probate, prevent court control of assets in the event of incapacity, provide for maximum privacy, can reduce or eliminate estate taxes and bring all assets together under one plan. Further, there are specific instances in which circumstances mandate the creation and funding of a revocable trust (also referred to as a living trust).
The following are some of those instances in which an individual should opt for a revocable trust rather than a last will and testament:
If an individual owns real property in more than one state, it is far more prudent for him to execute a trust. The trust instrument essentially allows for the transferor (also referred to as the creator or grantor) to maintain status quo during his lifetime.
Similar to a will, the document will dictate how the grantor’s property is distributed upon his death. The difference is that if the individual disposes of his assets through a will, an ancillary probate proceeding will have to be initiated in every state where real property is located. This can be very time consuming and costly.
Conversely, a living trust allows for the transfer of an individual’s property upon death without the need for any probate proceedings. Therefore, as long as the real properties were properly transferred to the trust (through deed transfers) during the individual’s lifetime, the property can be retransferred to the beneficiaries named in the trust, upon the grantor’s death without probate.
If an individual wishes to disinherit a child or any other heir who would have the right to inherit if no will existed, using a trust as the vehicle of choice will certainly be beneficial. When a will is probated, any heir who would have received an inheritance under state law had there been no will is given notice as to the probate proceeding and is required to waive his or her rights with respect to the appointment of an executor.
People who are disinherited and contest wills often do not prevail. Nonetheless, they are given a roadmap as to the entire probate proceeding, and the costs to defend such an action can be very significant.
While the validity of a trust can also be challenged, no notice or waivers are required and the trust assets can be distributed without delay.
Similarly, if an individual has no known heirs, has relatives who cannot be located, or has a very large family (many of whom would stand to inherit), it is again important to use a trust. Locating any heirs or lost relatives requires a tremendous amount of due diligence, including publishing notices in newspapers where the individual was last known to reside. This again can be extremely time consuming and costly to the estate. The administration of a trust upon the grantor’s death avoids the probate process and accordingly does not have all these onerous requirements.
Another situation where a trust is recommended does not involve the disposition of the assets upon the grantor’s death, but rather the management of his assets during his lifetime.
A revocable trust makes it much easier to manage the assets of the creator in the event he becomes incapacitated. Transferring one’s assets to a trust provides for asset management during one’s lifetime and can also allow for specific provisions if someone becomes incapacitated and cannot manage his own affairs. The trust document can name a successor trustee who will step in and continue the administration of the grantor’s financial affairs without interruption.
While the situations described above are just some examples of when a trust is recommended, it is clear that everyone’s circumstances must be analyzed individually in order to determine what should be the estate planning vehicle of choice. In addition, it is imperative to utilize the services of an estate planning attorney. And remember, a person can have a well-written, comprehensive trust, but if the trust is not funded properly or funded entirely, the intended results may not be accomplished.
Ronald A. Fatoullah, Esq., CELA (Certified as an Elder Law Attorney by the National Elder Law Foundation), is the principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts and wills. The firm has offices in Great Neck, Forest Hills and Brooklyn, NY. Mr. Fatoullah has been named a “fellow” of the National Academy of Elder Law Attorneys and is a former member of its Board of Directors. He also serves on the Executive Committee of the Elder Law Section of the New York State Bar Association. Mr. Fatoullah chairs the Legal Committee of the Alzheimer’s Association, LI Chapter and serves on its Board of Directors. He is also a co-founder of the Senior Umbrella Network of Queens, and currently serves on its Board of Directors. This article was written with the assistance of Debby Rosenfeld, Esq., a senior staff attorney at the firm. The firm can be reached by calling 718-261-1700, 516-466-4422 or toll free at 1-877-ELDER-LAW or 1-877-ESTATES.
