|
By John M. Bigler There are many different types of trusts including revocable, irrevocable, special needs trust for a disabled person, and a testamentary trust which takes effect after the death of an individual. Trusts are in writing and have a grantor or settlor who places assets into the trust. There is a trustee who is in charge of the assets once they are placed in the trust and beneficiaries who are those persons designated to receive the assets remaining in the trust once it has been terminated.
There are many advantages to setting up a revocable trust. One is avoiding probate. By avoiding probate, an individual can avoid court filing fees and a large attorney's fee, which might be based on a percentage of the estate. Typically, an attorney may charge between three and five percent of the gross estate for probating the will. By having the assets passed automatically to the beneficiaries by the successor trustee, the need for probate and, therefore, the need for a large attorney's fee are avoided. This does not mean that an attorney should not be consulted on the distribution of the assets. Typically, the cost of representation in such a matter would be an hourly fee. Another advantage of the revocable trust is that if it is necessary for a successor trustee to take over during the lifetime of the grantor as the result of the grantor,s disability, that trustee will have a much easier time handling the assets than someone who was merely appointed as power of attorney. This advantage can be critical in Medicaid planning where the speed and ease of making transfers without complications can result in the saving of significant assets.
Unfortunately, as the result of a good deal of false advertising, many people have assumed that the revocable trust accomplishes more than it does. One myth is that revocable trusts can save estate taxes that a properly drawn will cannot. However, assets passing through a revocable trust on death are taxable as part of the estate even though technically speaking, the assets do not pass through the Surrogate's Court as part of the probated estate. There is also the assumption that going through a probate proceeding in Surrogate's Court is a long, tedious and complicated procedure. This may be true in other states but, for the most part in New York probate is relatively straight forward matter which is normally handled without a great deal of problems, albeit, more expensively. Lastly, the revocable trust will not protect assets when the grantor applies for Medicaid. Any asset in the trust will be considered an available asset to the grantor. In conclusion, there are significant benefits to setting up a revocable trust. However, the grantor should clearly understand the benefits and not be deluded by various popular advertising in thinking that the trust could accomplish more than it actually does. Reprinted with permission of the Suffolk Times © 1999 [ Contact Us ] [ Guestbook ] [ Email ]  The Law Offices of John M. Bigler, Attorney At Law 1421 Wantagh Avenue, Wantagh, New York 11793-2206 1-888-ELDER-LAW · 516-409-6565 · Fax: 516-409-6522 E-Mail: info@biglerlaw.com · Web Site: www.biglerlaw.com |
A revocable trust is one in which the grantor can decide to terminate the trust at any time and return the assets to him or herself. Normally, the grantor is also a trustee and will continue to make decisions regarding the assets such as investment policies and withdrawals and deposits from the trust. The trust will indicate that on the death of the grantor, the designated beneficiaries will receive whatever assets are remaining in the trust. There will also be a co-trustee, usually a trusted family member who will take over responsibility for the trust on either the death or incapacity of the grantor.
Possibly the most significant advantage, at least at the moment, is that pursuant to New York State law, the assets in a revocable trust are not considered part of the probate estate. Since Medicaid liens can only be attached to the probate estate, assets passing through a revocable trust will avoid the lien. Since the Department of Social Services will also attempt to attach a lien to the estate of the spouse of a Medicaid recipient, setting up a revocable trust for the assets of the spouse could serve as an effective way to protect those assets from a Medicaid lien.