Individuals in New York and throughout the country can create living or testamentary trusts. A testamentary trust is included in a person’s will and takes effect when he or she passes. A living trust generally takes effect during a person’s lifetime, and it can be revocable or irrevocable depending on a person’s needs. Those who create revocable trusts have complete control of the assets inside of them and can change their terms whenever they want.
If a person creates an irrevocable trust, the assets inside of it are controlled by another individual or entity. In many cases, changes cannot be made to the document without a beneficiary’s consent. This type of trust may be ideal for those who are looking to shelter proceeds from a life insurance policy from estate taxes. A life insurance irrevocable trust may also allow a person to cover certain expenses after passing and provide beneficiaries with tax-free income.
It is important to note that individuals who make use of this tool will give up ownership rights to the policy. This means that they cannot use it as collateral or change a beneficiary designation. A qualified personal residence trust allows a person to hold a primary residence or a vacation home outside of his or her estate.
Living and testamentary trusts may make it easier to hold assets outside of an estate without necessarily losing control of them. By holding assets outside of an estate, it may be possible to lower a state or federal estate tax bill or shield property from creditor claims. An attorney may be able to help a person learn more about how to create a trust or the potential benefits of having one. He or she may also review trust documents that a person has already created.