New York residents who are thinking about setting up or updating an existing estate plan may be interested in the types of trusts available. These trusts, if created correctly, can help to minimize the tax burden on the estate and its beneficiaries.
When using trusts as part of an estate plan, it is important that the person creating them understand the types of trusts available. There are two main categories, depending on when the trust itself is set up. Inter-vivos trusts, also known as living trusts, are set up while the person is still alive, while testamentary trusts are created by a will at the time of the person's death.
Inter-vivos trusts come in two types: revocable and irrevocable. The revocable living trust allows a person to control the assets within the trust while they are still alive. They may also revoke the trust at any time before their death. Irrevocable trusts, on the other hand, make the assets within them belong to the trust. They are no longer the property of the person who set up the trust. Therefore, the trust cannot be changed or revoked after being set up. The benefit of losing this control of the assets is that they are not subject to the estate tax that would normally be applied to property passed down to beneficiaries.
There are other types of trusts available, each with its own aims, including minimizing taxes or protecting property from creditors. An attorney with experience in estate planning may be able to help assess a person's estate and determine the appropriate trusts and other documents. The attorney may also be able to assist with estate administration in order to help ensure that the person's wishes are fulfilled after their death.
Source: CNN Money, "What kinds of trusts are there?", December 09, 2014