As they begin planning how to dispose of their assets after they die, New York residents may be wondering if a will or a trust is the best way to go. Some trusts can ease the tax liability and may make it easier to settle an estate, since probate is avoided.
If New Yorkers decide upon a trust, do they want a revocable trust or an irrevocable trust? This decision should be made carefully, as an irrevocable trust cannot be changed, while a revocable trust can be modified.
One disadvantage to irrevocable trusts is the assets cannot be touched should settlors require in-home health care in their later years or need funds for other purposes. This is because the settlor no longer "owns" them. However, an irrevocable trust can also cut the tax burden on estates, since assets held in trust are not considered part of the estate. Another disadvantage to an irrevocable trust is that it cannot be changed should settlors change their mind later. This is why it is so important for settlors to be 100 percent certain an irrevocable trust is right for them.
Estate planning can be complex, especially when it comes to trusts. While there are a variety of circumstances where trusts can be effective, a main one is where the settlor is worried that a beneficiary will be profligate with an inheritance. Unlike a will, where the disbursement is in a lump sum, trusts can be structured with the help of an attorney to provide that a beneficiary will receive distributions only upon the attainment of a certain age or the completion of certain milestones.