Some people in New York may wonder whether a revocable or irrevocable trust would be best for their estate plan. In most cases, a revocable trust, which remains in the creator’s control, is sufficient for keeping the assets out of probate so they can pass quickly and privately to the beneficiary.
There are only a few circumstances in which an irrevocable trust is useful. They can be used to avoid or minimize estate tax. While the federal estate tax is high enough that very few people need to worry about this, the New York estate tax might make this necessary for some. Another advantage is that an irrevocable trust can take assets out of a person’s estate so that they can qualify for Supplemental Security Income or Medicaid. This can ensure that those assets can be passed on to beneficiaries as well. An irrevocable trust can also protect assets from creditors. This type of asset protection trust is not available in many states, including New York, but it may be possible to establish an irrevocable trust in another state.
Irrevocable trusts may also have a number of disadvantages, mainly related to the lack of control the creator has. If the creator has a falling-out with a beneficiary or wants to sell property in the trust, it may be difficult or impossible to make a change.
An attorney might help a person review options and determine whether a revocable or irrevocable trust would be best or if a trust is needed at all based on the person’s assets, goals and challenges. While people with a will as their main estate planning document might need a power of attorney to appoint someone to step in and take over finances in case of incapacity, a revocable trust can do the same thing by appointing a successor trustee.