Types of Trusts:
Testamentary Trust. A Testamentary Trust is a Trust created in your Will and does not become effective until your Will has been admitted to probate, at which time the Trust will be established and once property is placed in the Trust, the Trustee will administer the property as set forth in your Will.
Living Trust. A Living Trust can be either revocable or irrevocable . A Revocable Trust can be changed or terminated by you at any time prior to your death or incapacity. An Irrevocable Trust is as its name implies in that it generally may not be revoked or amended by the individual establishing the Trust. Most Living Trusts used in an individual's estate planning documents are revocable, permitting them to make changes to the Trust as they desire. Trusts A-Z (English Version)
Revocable Living Trust. Revocable Living Trust or a Family Trust is a legal document that holds title or ownership to your real property and assets. When you create a Revocable Living Trust you transfer ownership of your assets to the trust. Transferring assets is typically called "funding." When you transfer title you DO NOT relinquish any control. You can still buy, sell, borrow or transfer.
Irrevocable Trusts. An Irrevocable trust is an arrangement in which the grantor departs with ownership and control of property. Usually this involves a gift of the property to the trust. The trust then stands as a separate taxable entity and pays tax on its accumulated income. Trusts typically receive a deduction for income that is distributed on a current basis. Because the grantor must permanently depart with the ownership and control of the property being transferred to an irrevocable trust, such a device has limited appeal to most taxpayers. Irrevocable trusts, however, are useful in life insurance planning. For instance, a properly structured irrevocable life insurance trust or ILIT can avoid probate costs and fees, and estate taxes on the insurance proceeds paid to the trust upon the grantor's death. Irrevocable trusts are also useful in providing children, especially those over age 14, with a fund for education or other specific planning purposes. Such trusts are called Educational Trusts and are usually funded with "after-tax" dollars through a gift. The annual gift tax exclusion (an exclusion for gifts of $12,000 or less per year per donee) does not apply to gifts of a future interest (such as a gift to a trust), so the so-called "Crummy" trust provisions must be properly applied to make the gift a "present" interest. Drafting such clauses requires expertise. Law Offices of Inna Fershteyn will be happy to assist you with creation and management of Irrevocable Life Insurance Trusts and Educational Trusts.
Spendthrift Trusts. A spendthrift trust is a trust account overseen by a trustee, such as your bank or private banker, that controls the assets you leave after you've died. The beneficiary is forbidden from spending the money before he or she actually receives distributions and the trustee has the authority to determine what payments are necessary according to the trust agreement. For example, if you left $5 million to your favorite nephew, and the trust account generated $250K per year in income that was paid out to him, he couldn't pledge the trust assets as collateral. If he did spend more than he was able to support - say, for example, he bought a $3 million house - the credits would simply be out of luck. The only cash they can collect from your nephew would be his $250K distribution, keeping the assets in place, collecting interest, and other income safely and securely for decades to come.
Supplemental or Special Needs Trusts. Special needs trusts (also known as "supplemental needs" trusts) allow a disabled person who is currently receiving governmental aid such as SSI or Medicate to receive gifts, lawsuit settlements, or other funds and yet not lose his or her eligibility for certain government programs. In order to create such a trust, trust and estate attorney, such as Law Offices of Inna Fershteyn, shall be contacted. Our experienced attorneys will draft such trusts so that the funds that will be put in the trust will not be considered to belong to the beneficiary in determining his or her eligibility for public benefits.
As their name implies, special needs trusts are designed not to provide basic support, but instead to pay for comforts and luxuries that could not be paid for by public assistance funds. These trusts typically pay for things like education, recreation, counseling, and medical attention beyond the simple necessities of life. (However, the trustee can use trust funds for food, clothing, and shelter if the trustee decides doing so is in the beneficiary’s best interest despite a possible loss or reduction in public assistance.) Special needs can include medical and dental expenses, annual independent check-ups, necessary or desirable equipment (such a specially equipped vans), training and education, insurance, transportation, and essential dietary needs.
How can a Special Needs Trusts be funded? Special Needs Trust can be funded with proceeds of personal injury settlement or a life insurance. A parent with a child with special needs should consider buying life insurance to help fund the special needs trust set up for the child’s support. What may look like a substantial sum to leave in trust today may run out after several years of paying for care that the parent had previously provided. The more resources available, the better the support that can be provided the child. And if both parents are alive, the cost of "second-to-die" insurance -- payable only when the second of the two parents passes away -- can be surprisingly low. If the trust is sufficiently funded, the disabled person can also receive spending money, appliances, computers, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses.
Who can create a Special Needs Trust for disabled person? Often, special needs trusts are created by a parent or other family member for a child with special needs (even though the child may be an adult by the time the trust is created or funded). Such trusts also may be set up in a will as a way for an individual to leave assets to a disabled relative. In addition, the disabled individual can often create the trust himself, depending on the program for which he or she seeks benefits. These "self-settled" trusts are frequently established by individuals who become disabled as the result of an accident or medical malpractice and later receive the proceeds of a personal injury award or settlement.
For more information about Trusts go to Articles page of this website or contact Law offices of Inna Fershteyn at (718)333-2394.
Additional Trusts and Estate Articles:
Trusts & Estate Overview
Wills v Trusts
Probate Law
Intestacy Laws
Trusts A-Z (English Version)
Other Trust and Estate Documents:
Durable Powers of Attorney
Living Wills
Health Care Proxy
Will and Trust Glossary
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