One way to ensure you control where your assets end up after your death is to create a trust. A trust is created when the trustor gives the trustee (a third party) the right to handle their assets on behalf of a beneficiary, ensuring the beneficiary receives exactly what you want them to get.
In the United States, there are several types of trusts one might create, and all serve a different purpose depending on the trustor and beneficiary's needs. If you are looking to form a trust, an experienced attorney will create one that fits your needs.
Common Types of Trusts in New York
A revocable trust is one of the two most common trusts created in New York. This type of trust is modifiable – meaning it can be changed or canceled at any time and can be done without the beneficiary's permission. The only requirements are that the trustor is still alive and of sound mind.
The second most common type of trust created in New York (and really the country) is an irrevocable trust. This type of trust asks the trustor to give up their rights to the trust once it's created. Meaning, the trustor cannot make any changes or terminate the trust once it is created.
Irrevocable Life Insurance Trust
An irrevocable life insurance trust permits a trustor to take their life insurance out of their estate. Generally, when still incorporated into the deceased's estate, life insurance policies are subject to taxes. By removing it from the estate, the trustor is endeavoring to prevent it from being taxed, potentially decreasing the amount of insurance the beneficiary received.
There are two types of charitable trusts – lead and remainder trusts. Charitable lead trusts permit a trustor to choose charities that collect interest from their gift for a specific period. When that time ends, whatever is left goes to the family of the deceased or other beneficiaries. Alternatively, a charitable remainder trust also permits charities to collect interest on the gifts until the end of a specific period, after which they can collect assets from the trust.
If you have any questions about these common types of trusts, get in touch today.