Estate Planning 101: When You DO Need a Trust and When You Really Don’t

By Stephen J. Silverberg
New York Elder Law Attorney

Thank you to The Island Now for including my article on trusts in a recent issue – “Trusts – Marketing machine or genuine estate planning tool.”The article was written to inform readers about the difference between trusts that are used as part of a comprehensive asset preservation plan and those that I believe are being marketed to seniors inappropriately.

As an experienced trusts and estates attorney, I work with clients to create trusts every day. There are many, many different types of trusts, and they all serve different purposes:

  • Special Needs Trusts (SNTs)
  • Charitable Trusts
  • Spendthrift Trusts
  • Testamentary Trust
  • Living Trusts
  • Revocable Trusts
  • Irrevocable Trusts

For families with complicated lives and significant assets, trusts can be a great tool to pass wealth to the next generation with a certain amount of control. For a family with a special needs individual, SNTs are a useful way to protect the individual’s government funded benefits while preserving assets to ensure quality of life when the parents pass away. When a family member is dealing with an opioid addition, a trust can protect the individual from blowing through an inheritance to purchase drugs and in some cases, require that they remain in rehabilitation or return to rehabilitation to continue to receive trust funds.

Who needs a trust? An average family with a bank account, an IRA and a modest home (on Long Island, a modest home is in the $450,000 to $650,000 range) only needs a trust if they are anticipating one of the spouses needing to apply for Medicaid for long-term nursing care. That type of planning needs to be done well in advance to avoid the five-year look-back period.

If your home is placed into a living trust, it loses creditor protection and Medicaid exempt status.

This is not the kind of trust that you want to get after attending a dinner seminar. It’s a trust that is part of a strategic legal plan to prepare the family so that assets can be preserved and the ill spouse can receive the care they need.

Another important thing to know about trusts is that they do not always avoid probate nor do they avoid estate administration. Because your assets have been placed in trust does not mean that your family won’t have to execute your will, value assets, pay debts and make distributions to beneficiaries.

Here’s the best advice about trusts: sit down with an experienced estate planning attorney who has the knowledge of trusts, tax planning and estate law. Talk about the issues your family faces, the goals you’d like to achieve, like sending a grandchild to college, or giving everything you own to a charity that matters to you. Work out an estate plan.

If the plan requires a trust, the attorney will explain why. Ask questions, and if you don’t understand the answers, don’t smile and nod your head. Keep asking until you understand what is being done on your behalf, and why.

If you have questions, please feel free to call me at 516-307-1236.

About the Author
Stephen J. Silverberg is nationally recognized as a leader in the areas of estate planning, estate administration, asset preservation planning, and elder law. He is a past president of the prestigious National Academy of Elder Law Attorneys (NAELA), and a founding member and past president of the New York State chapter of NAELA.