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Trusts and Estate Planning

Many people have preconceived notions about trusts and believe that they are only for multi-millionaires who wish to leave large trust funds to their children. However, this is far from the truth; trusts can be invaluable tools in the estate plans of millions of individuals of modest means.

Trusts are simply an arrangement where one party holds property on behalf of another party. In an estate planning context, trusts are created by the person doing the estate planning (the settlor), who authorizes another person (the trustee) to manage the assets for the benefit of a third party (the beneficiaries). There are many reasons for establishing trusts including tax minimization or providing for the needs of underage beneficiaries.

Some types of trusts that may be useful in estate planning are:

  • Trusts for minors. Many people leave money to their children or their grandchildren in a trust as part of a comprehensive estate plan. This is typically done to ensure the money is there for the children’s benefit while they are younger-for support, education, medical expenses, etc. Once the children reach a certain age or achievement level (such as obtaining a bachelor’s degree), they may receive money from the trust to do with as they please.
  • Special needs trusts. Special needs trusts are tools that enable a person to leave property to an individual with special needs. Many individuals with special needs receive government benefits. If they were to suddenly inherit money they would, in most cases, be disqualified from those benefits until the inheritance was spent. Special needs trusts protect those individuals’ government benefits while allowing their trustee to use trust assets for items that can be used to supplement their governmental benefits.
  • Marital trusts. Married couples sometimes include trusts in their wills, or separately, for the benefit of their spouse, typically for two reasons: (1) taxes, and (2) property protection. In previous years, marital trusts were needed for some couples to take advantage of estate tax exemptions, and they may be needed in the future as laws change. Marital trusts can also protect property from a spouse to ensure that it ultimately goes where it is intended to go. For example, a husband with grown children from a previous marriage may decide to let his wife use his property after he passes, but puts it into a trust so that after she dies it goes to his children.
  • Revocable living trusts. Revocable living trusts are documents completely separate from wills although they often work hand in hand with wills to carry out the decedent’s wishes. Revocable living trusts are typically used to avoid probate in states where probate is particularly cumbersome, to make it more difficult to challenge an estate plan (usually from a child  that may be disinherited), or in other instances, such as when a person owns real estate in multiple states.
  • Irrevocable trusts to protect assets from the costs of long-term care (Medicaid):  Certain types of irrevocable trusts can be created to preserve and protect assets in the event of that future long-term care is needed.    These trusts can be created to preserve and protect, while at the same time leaving the person or persons creating the trust with a large degree of control over the assets.  It does require giving up a certain degree of control, but if a goal is preserving assets, these types of trusts work wonderfully.
  • Irrevocable life insurance trusts. Irrevocable life insurance trusts (or ILIT’s) can be used in order to move a person’s life insurance proceeds outside his or her estate for estate tax purposes, and allow the trust funds to pass completely estate tax free to ones loved ones. 
  • Spendthrift trusts. Spendthrift trusts are generally established to protect the beneficiaries’ assets from both themselves and creditors. These trusts usually have an independent trustee which has complete discretion over the distribution of assets of the trust.

As you can see, there are many different types of trusts, each of which can be customized to serve a valuable purpose in accomplishing the wishes of those making gifts or planning an estate. An experienced estate planning attorney can help you assess your finances and goals to determine the best vehicles to preserve your wealth and your legacy. 


The Law Office of Martin Hersh, Esq. assists clients with Elder Law & Estate Planning needs in Liberty, Middletown, Newburgh, Goshen, Kingston, and Wurtsboro, and just about every town or village within Sullivan County, Orange County and Ulster Counties in New York State.

The material presented on this site is included with the understanding and agreement that the Law Office of Martin Hersh is not engaged in rendering legal or other professional services by posting said material. The services of a competent professional should be sought if legal or other specific expert assistance is required.



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