Trusts can be an effective estate planning tool for New York residents. However, they may not always be needed. Furthermore, a trust could be constructed in a way that doesn’t meet a person’s needs. For instance, making a gift could reduce the amount of a person’s estate and take advantage of the $11.8 million federal estate and gift tax exemption. However, if a person needs the gifted money later, it may not ultimately benefit him or her to make that gift.
It is also important for an adviser to determine if a person would benefit more from a grantor or a non-grantor trust. This can be determined by consulting with an individual’s CPA and estate planning adviser. The type of assets that an individual has may best determine what type of trust best meets his or her needs. For instance, someone looking for a place to put a life insurance policy may be better off with a grantor trust.
However, people who are looking to make the most of their charitable contributions may want to use a non-grantor trust instead. Regardless of the type of advice an adviser provides, it should be done from a big picture perspective. This increases the odds that a trust is created for the right reasons as opposed to attempting to exploit temporary changes to the tax code.
Using trusts as part of an estate plan may help to preserve assets both now and in the future. If a trust has already been created, an attorney may review it to determine if it still meets a client’s needs.