When structured properly, trusts can be powerful estate planning tools for New York residents. In 2017, the Tax Cuts and Jobs Act was passed, and it increased the estate tax exemption until at least 2025. While that could be a good thing for many people, it is also worthwhile to plan for the possibility that the rules change again after the legislation expires.
Ideally, trusts will be constructed with as much flexibility as possible. One way to add flexibility is to grant trustees the ability to determine when to make distributions to beneficiaries. Where allowed under state law, decanting can be an effective way to change an estate plan to reflect a person’s changing needs. Decanting allows an individual to take assets out of an irrevocable trust and put them into another such trust.
In some cases, it could be worthwhile to put someone in charge of the trustee. The use of a trust protector could be ideal if the terms of the document need to be enforced over long periods of time. Although not a trustee per se, this person or entity would have the authority to remove a trustee. The trust protector can also change a beneficiary or vote against any idea that may not represent the best use of trust assets.
The use of an irrevocable trust could make it easier to protect assets from creditors. However, it may also mean that a person loses control over those assets and how they are used. An attorney may be able to explain the pros and cons of this type of trust as well as other important components of an estate plan.