Have You Considered a Trust?

There are a number of reasons to consider placing your assets in a trust. There are also times when a trust is unnecessary, so exercise caution when making the decision.

Many people choose a trust as a means to avoid probate after an individual passes away. This is a good idea if the deceased had no immediate family or if he owned property in more than one state.

The probate courts of New York require that the estate’s petitioner obtain a “waiver and consent” to probate from all relatives at the same distance level from the deceased. For example, if the deceased was only survived by first cousins, they would all have to give their consent. Some of these cousins might not have even been known by the deceased. On the other hand, if there is surviving immediate family, the probate process can be relatively smooth and not costly. The probate fee is charged on a sliding scale based on the size of the probate estate, and the maximum probate fee is $1,250.

Another reason for a trust is to shield the assets from a claim by Medicaid for services rendered to an individual for either nursing home or home care. These trusts must be set up at least five years before receiving any assistance from Medicaid. The senior who sets up the trust cannot touch the principal assets in the trust, or they will not be exempt from the Medicaid claim. For this reason, non-income-producing properties, such as the home, are the best assets to consider placing in a trust. It’s also important to make an analysis of what cash assets will be needed to live on before placing assets in the trust.

Trusts are also a useful device if the goal is to help a disabled family member. A person with a disability may be receiving government benefits. The assets in the trust can be used to supplement, not replace, the government assistance.

There are other reasons to have a trust, such as protection against creditor claims. Or if the individual does not have someone who could act as their power of attorney, then a trust may be an alternative that enables the trustee to manage the individual’s affairs when they become incompetent. The trust must be irrevocable, which means the individual setting up the trust cannot later change his mind and revoke it unless all beneficiaries are able to consent.

Before setting up a trust, it’s always important to meet with an attorney to discuss the pros and cons and to see that the proper language is used in creating the trust.

If you have questions or comments, please contact us today.

Robert W. Shaw, Esq.
(914) 328-1222
E-mail Bob

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