Trust Planning in New York: Living Trusts vs. Testamentary Trusts
Estate planning involves more than simply drafting a will. For many individuals and families, trusts can play an important role in protecting assets, providing for loved ones, and ensuring that property is distributed according to their wishes. Two common estate planning tools are living trusts and testamentary trusts. While both can help achieve estate planning goals, they function in very different ways.
At N. Khasidova & Associates in Rego Park, NY, we help clients understand their options and develop Estate plans tailored to their unique circumstances. Understanding the differences between living trusts and testamentary trusts can help you determine which approach may be appropriate for your family and financial goals.
What Is a Living Trust?
A living trust, also known as a revocable trust, is created and funded during the trust creator’s lifetime. The person creating the trust, often referred to as the grantor, transfers assets into the trust and typically serves as the trustee while maintaining control over those assets.
Because the trust is established during the grantor’s lifetime, it can generally be modified, amended, or revoked as circumstances change.
Benefits of a Living Trust
Avoiding Probate
One of the primary advantages of a living trust is that assets properly transferred into the trust typically pass directly to beneficiaries without going through probate.
Privacy
Unlike a will, which becomes part of the public record during probate proceedings, a living trust generally remains private.
Planning for Incapacity
If the grantor becomes incapacitated, a successor trustee can step in and manage the trust assets in accordance with the trust’s terms without court intervention.
Greater Flexibility
Living trusts can be updated as life circumstances change, making them a flexible estate planning tool.
What Is a Testamentary Trust?
A testamentary trust is created by a will and becomes effective only upon the death of the person who created the will.
Unlike a living trust, a testamentary trust does not exist during the creator’s lifetime. Instead, it is established after death through the probate process and funded with assets from the Estate.
Benefits of a Testamentary Trust
Asset Management for Beneficiaries
A testamentary trust can provide ongoing management of assets for beneficiaries who may not be ready to receive a large inheritance outright.
Protection for Minor Children
Parents often use testamentary trusts to ensure assets are managed responsibly for minor children until they reach a specified age.
Control Over Distributions
The trust creator can establish guidelines for when and how beneficiaries receive funds, helping preserve assets over time.
Special Planning Needs
Testamentary trusts may be useful when providing for beneficiaries with unique financial or personal circumstances.
Which Trust Is Right for You?
The right choice depends on your individual goals, family dynamics, asset structure, and long-term planning needs. Some individuals benefit from a living trust because of its probate-avoidance and incapacity-planning benefits, while others may find that a testamentary trust adequately addresses their estate planning objectives.
In some cases, a comprehensive Estate plan may incorporate both a will and trust-based planning strategies.
Discuss Your Estate Planning Goals with N. Khasidova & Associates
Trusts can be valuable tools for protecting assets and providing for future generations, but selecting the right strategy requires careful planning. At N. Khasidova & Associates in Rego Park, NY, we help individuals and families evaluate their estate planning options and create customized plans designed to meet their goals.
If you are considering a living trust, testamentary trust, or other estate planning tools, contact our office today to schedule a consultation and learn how we can help you protect your legacy.