Mullen and Iannarone, P.C.
Serving the legal needs of corporations, individuals and
families of Suffolk County since 1972

The versatility of trust funds

People in New York who are creating an estate plan may want to consider setting up trusts for their beneficiaries. While some may think of trusts as being tools for wealthy people to preserve their fortune or avoid tax, they actually have many other uses. A trust may be revocable, meaning it can be changed within a person's lifetime, or irrevocable, meaning that changes cannot be made. The advantage of an irrevocable trust is that it removes the assets from the owner's estate and protects those assets from lawsuits and creditors.

A person can also place their home in a trust known as a qualified personal residence trust. This locks in the value of the home when the deed is transferred into the trust. Thus, beneficiaries could pay less in taxes if the home value goes up. Under a qualified personal residence trust, the owner is still permitted to live in the home for a specified amount of time. However, if the owner dies prior to that, then the home returns to become part of the estate.

With a generation-skipping trust, a person can bypass their children and leave assets for their grandchildren. Another option is a credit-shelter trust, which can reduce estate tax for couples. However, this is less commonly used since the government now allows couples to combine their estate tax exemption.

Trusts can be set up to leave an estate to charity, to care for loved ones who are incapacitated, to preserve wealth across generations and for many other purposes. They are so versatile that they may well meet the needs of a person who has a complex family situation. For example, a person might have a child with an addiction problem that they still want to leave money to. A trust could distribute a small amount at certain intervals to help reduce the likelihood of the child squandering all the money at once.

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