Welcome to the Living Trusts & Testamentary Trusts department at the Law Offices Of Roman Aminov. Navigating the different aspects of setting up a trust is simple when you have the experts of our law firm on your side. To discuss setting up a Living trust (while you are alive) or a Testamentary Trusts (applicable after death) contact us now and we will set up a free phone consultation for you. In the meantime, we invite you to learn more about this intricate topic so you can make a better informed decision by reading the article below.
From Roman Aminov's Living & Testamentary Trusts Blog
When we plan for the future, we have two main ways to set up a trust to protect our belongings and our family.
Our Options for Creating a Trust
First, we can create a testamentary trust, which is a special part of our will. This type of trust doesn't actually exist until after we pass away. Once that happens, our will goes through a legal process called probate, and the person we chose to run our estate—the executor—moves our money and property into the trust based on the rules we wrote down. We often use this to look after our children; for example, we might set up a minor’s trust to keep money safe for our kids until they are old enough to handle it themselves.
On the other hand, we might choose a living trust, which is also called a revocable living trust. Unlike the first option, we set this one up right now while we are still alive. We can act as our own trustees, which means we stay in control of everything. We also have the freedom to change the rules or even cancel the trust whenever we want. This is very helpful because it keeps our assets organized while we are here, and it allows everything to keep running smoothly if we get sick or pass away without having to wait for a court to get involved.
Probate: Required vs. Avoidable
Testamentary trust = probate required. Since the trust is in your will, a Surrogate’s Court must admit the will to probate first. Only then can the executor transfer assets into the testamentary trust. This involves timelines, court filings, notifying heirs, and a public record.
Living trust = probate minimization (if funded). Properly funding a revocable living trust during life - retitling your real property and accounts to the trust - allows those assets to pass to beneficiaries without probate. Your “pour-over will” catches anything left outside the trust and transfers it in later (that portion still goes through probate).
Key takeaway: If avoiding probate delays, costs, and publicity is important, a funded living trust is the more efficient vehicle.
Funding and follow-through
Testamentary trust: Needs no funding during your lifetime. Your executor transfers assets into the trust after probate.
Living trust: Operates only if you fund it. This involves retitling assets, updating beneficiary designations, and recording new deeds for real estate. Many plans fall short because funding remains incomplete. A solid estate plan includes a clear funding checklist and assistance to ensure it's completed correctly.
Privacy and Speed
- Testamentary trust: Your will, along with the trust terms within it, usually becomes part of the public probate file. Court timing and required notices can cause delays in distributions.
- Living trust: Generally private, with administration managed by your successor trustee without court supervision. This often allows quicker access to funds for your loved ones.
Incapacity planning
- Testamentary trust: Provides no lifetime management; it only takes effect upon death. You still need a durable power of attorney and health care proxy if you become incapacitated.
- Living trust: Excels here. If you fall ill or become incapacitated, your successor trustee can manage trust assets without the need for court intervention.
Costs
Testamentary trust: Usually has a lower upfront legal cost since trusts are created inside a will. Administration costs hit after death and include probate.
Living trust: Typically comes with a higher upfront cost because it establishes a full non-probate structure and involves funding work. Many families recoup that investment through reduced probate, fewer delays, and smoother administration.
Control, protection, and taxes
Both options can have detailed controls. These include age-based distributions for kids, education or work incentives, staggered payouts, and protections against a beneficiary’s creditors or divorcing spouses once assets are held in trust.
Revocable living trust: While the grantor is alive and the trust is revocable, it usually does not protect the grantor’s assets from their own creditors, lawsuits, or long-term care costs. It's more of a probate-avoidance and management tool than a personal asset-protection device.
Testamentary trust vs. living trust for taxes: For many families, the choice between testamentary and revocable living trusts is not mainly about tax planning. Both types can be written to use tax-efficient formulas if necessary. If asset protection or advanced tax/Medicaid planning is your goal, you might add irrevocable trusts into your estate plan.
Common use cases
Choose a testamentary trust when you:
- Want a simple will and don't mind going through probate.
- Prefer to delay expenses until after death.
- Need minor’s trusts or straightforward age-staggered distributions without altering your current assets.
- Have a small probate estate with established beneficiary designations for major accounts.
Choose a revocable living trust when you:
- Want to skip probate and keep your plan private.
- Own real property (especially in multiple states) and want to avoid several probates.
- Value seamless management if incapacitated - a successor trustee can handle bills and investments without court steps.
- Have a mixed family, business interests, or beneficiaries needing long-term oversight.
- Wish to simplify administration for your spouse or adult children.
(If you're taking care of someone with special needs who gets or might get public benefits, you may also need a Special Needs Trust. It can be made as testamentary or living based on the situation.)
What about a “pour-over will”?
Even with a living trust, we still sign a pour-over will. It names the same guardians for minor children and "pours" any stray assets into our trust at death. Assets caught by the pour-over will do go through probate; that's why proactive funding is so important.
Picking the right path
There’s no one-size-fits-all answer. A young couple with modest assets and young children might prefer a will with minor's trusts and simple beneficiary designations. A family valuing privacy, speed, and incapacity planning could lean towards a revocable living trust, especially if they own real estate in New York or other states.
Many New Yorkers choose a living trust for efficiency, adding specific irrevocable trusts when asset protection or Medicaid planning becomes crucial.
How we can help
At the Law Offices of Roman Aminov, P.C., we create testamentary trusts and living trusts for clients in Queens, Brooklyn, and the greater New York City area. We will guide you through funding your trust and tailor trustee powers and distribution standards to fit your family, values, and assets. Most importantly, we make sure your plan is practical so it works as intended when it matters most. For a free consultation with an experienced estate planning attorney, call Roman Aminov today at 347-766-2685.
FAQs
1. What is a living trust?
A living trust, also known as an inter vivos trust, is created during your lifetime. It helps in estate planning by managing real property and other assets.
2. How does a testamentary trust differ from a living trust?
A testamentary trust is set up through your last will and testament. Unlike a living trust, it only takes effect after you pass away.
3. Can I change or revoke my living trust?
Yes! You can amend or revoke your living trusts at any time while you're alive unless it's an irrevocable type.
4. Do I need to worry about estate taxes with these trusts?
Both types of trusts can help reduce estate tax liabilities but consult legal advice for effective tax planning strategies specific to New York City laws.
5. What role does life insurance play in these trusts?
Life insurance policies can be placed into either type of the two main kinds of trusts to provide financial security for beneficiaries without going through probate court.
6. Are there special types of charitable remainder trusts available in NY?
Absolutely! Charitable remainder and qualified personal residence are among the various specialized options like supplemental needs or grantor retained annuity that cater specifically towards different goals including charity donations within Nassau County laws.
