How To Apply for Medicaid on Long Island?

Medicaid is a federal and state program that helps people with limited income to afford their essential healthcare needs. Compared to Medicare, Medicaid also provides funding for nursing home care and personal care services. Medicaid is the largest provider of medical and health-related funding for individuals in need. As of July 2022, it is estimated that almost 90 million individuals, or almost 27% of Americans, have enrolled and availed of Medicaid benefits.

As a means-tested program, Medicaid applicants are commonly subjected to strict eligibility criteria before they can avail of benefits. The requirements are almost prohibitive and may require applicants to spend or give away some of their assets just to qualify for the program. However, with the help of an experienced Long Island Medicaid planning attorney, you may be able to retain eligibility while being able to keep your assets. Additionally, a skilled Medicaid planning lawyer can assist in developing a plan that considers the Medicaid estate recovery program and may help minimize the impact of estate recovery on the individual’s assets and their beneficiaries.

Contact Schlessel Law PLLC at (516) 574-9630 to schedule a consultation.

What Benefits Can Medicaid Pay For?

New York’s Medicaid program pays for a wide range of services. Medical coverage is often covered through the use of a Medicaid card or a managed care plan for those enrolled in care facilities. Generally, the services that Medicaid provides can be divided into three:

• Community Medicaid – covers hospital and doctor visits including lab tests and prescription medication
• Community Medicaid with Long-Term Care – long-term care under Medicaid includes different types of services such as medical, social, housekeeping, and rehabilitation. These services can be provided in nursing homes, patients’ residences, and assisted-living facilities
• Nursing Home Medicaid – services provided by medical facilities certified by state survey agencies as Medicaid Nursing Facilities
  • Skilled Nursing 
  • Rehabilitation – post-hospital care needed due to injury, disability, or illness
  • Long-term care – healthcare services above the basic room and board

What Are the Eligibility Requirements for Medicaid on Long Island?

People under the following categories are eligible to apply for Medicaid:

• US nationals, citizens, green card holders, or legal aliens
• People under 21 or older than 65
  • People who are above the age of 21 may be eligible for Medicaid if they are pregnant, responsible for a minor, blind, have a disability, or have a household member with a disability

In addition to the eligibility categories, Medicaid applicants must also pass a means test, meaning their annual household income would be evaluated by the state. The applicant must be able to prove that they do not have the financial ability to pay for Medicaid out of their pocket.

What Is the Income Limit to Qualify for Medicaid in NY?

Understanding the income limits for Medicaid in New York can help you determine if you qualify for this health coverage program. The income limits vary depending on your marital status and whether one or both spouses are applying.

For the year 2024, here are the monthly income limits for Medicaid eligibility in New York:

• For Single Individuals: The monthly income limit for a single person applying must not exceed $1,732 to qualify for Medicaid.
• For Married Individuals (One Spouse Applying): If only one spouse is applying for Medicaid, the income limit for the applicant is set at $1,732 per month. 
• For Married Couples (Both Spouses Applying): The combined monthly income limit is $2,351. This means that to qualify for Medicaid, the total income of both spouses must not exceed this amount per month.

These income figures are essential as they directly influence eligibility for Medicaid in New York. Staying within these limits is necessary for those seeking to receive Medicaid benefits. If you or someone you know is close to these limits and considering applying for Medicaid, careful review of monthly income and proper application submission are crucial for a successful enrollment. This will help in securing the necessary health coverage without any unexpected challenges.

What Is the Medicaid Look-Back Period? Are There Assets Exempted From the Means Test?

The Medicaid look-back period is the timeframe of your financial statements Medicaid uses to evaluate your financial standing. The timeframe can vary from one state to another but New York has a 60-month or 5-year look-back period on Nursing Home Medicaid.

The state will evaluate your financial statements to see that you didn’t just gift away your assets to friends and family to retain them. If you are found to have given away your assets, you may lose your eligibility and may be prevented from applying for some time.

Long Island medicaid planning attorney

Some assets are exempted from the look-back period. The valuations of these assets will not be included in the value that will be counted against you in the look-back period.

• Your primary residence – the residence where the Medicaid applicant lives (or has intent to return) is exempt provided that the home equity interest is less than $955,000 
• A primary vehicle – as long as it is fair market value, you may keep a motor vehicle regardless of value as long as it is necessary for employment or transportation for medical treatment, and/or modified for the transportation of a handicapped person
• Personal effects and household goods – items such as clothing, jewelry, hobby items, recreational equipment, and musical instruments may be exempted. However, if they have significant value, they may be considered investments rather than heirlooms.
• A burial trust or burial allowance – burial funds of up to $1,500 are exempt from the look-back period
• 401k and IRAs in payout status
• A life insurance policy with a value of $1,500

You may be eligible for other exemptions. It is crucial to seek the help of an experienced Long Island Medicaid planning attorney to be able to explore your options and determine your eligibility for other exemptions.

What Should I Do If I Don’t Meet the Means Test Eligibility?

There are some options that you can explore if you don’t meet the eligibility criteria. However, it must be noted that careful planning is essential to make sure that you don’t violate any of the Medicaid regulations.

Spending down assets

Most people spend down their assets and use their excess resources to pay for medical bills out of pocket until they can qualify for benefits. This method can be applied through spending assets on debt, mortgages, bills, etc. as long as they do not fall outside of fair market value.

Medicaid Planning

Medicaid planning involves the use of estate planning measures to allow a person to avail of government benefits without losing most of their assets. This method can be very useful to individuals who have complex assets that would not be easily addressed through other methods.

Options for Those Who Don’t Meet Means Test Eligibility	Description
Spending Down Assets	Many individuals spend down their excess assets to cover medical expenses until they qualify for Medicaid. This can include paying off debt, mortgages, bills, etc., as long as they don’t exceed fair market value.
Medicaid Planning	Medicaid planning utilizes estate planning strategies to help individuals qualify for government benefits while preserving a significant portion of their assets, especially when dealing with complex assets.

How Long Does It Take for Medicaid To Be Approved

The processing time for Medicaid applications is typically 45 days, while applications requiring disability determinations may take up to 90 days. Failure to provide necessary documents promptly can extend the processing time for determining eligibility. Non-cooperation with Medicaid can result in the denial of the application, necessitating a new application submission after gathering the required documents, further delaying the eligibility date.

In the event of eligibility, the Medicaid agency will notify you via letter, providing your eligibility date and the amount of payment required for your care. This payment could be in the form of spend down liability if you qualify as medically needy or a share of the cost if eligibility is based on other criteria.

Submitting a Medicaid application at the earliest opportunity can provide peace of mind, as it allows applicants to plan for their medical expenses and avoid potential financial difficulties. Moreover, an early application can help applicants identify any potential issues with their eligibility, which they can address and resolve promptly. A skilled Medicaid planning attorney can guide you through the entire application process, helping you avoid mistakes or submitting incomplete or inaccurate information that could delay your application. At Schlessel Law PLLC, our team of New York Medicaid lawyers may be able to help increase the chances of a successful Medicaid application. Call us to learn more about how we can help.

Common Reasons for Denial and How to Challenge Them

Medicaid applicants on Long Island often encounter denials due to common issues, such as incomplete applications, missing documentation, exceeding financial limits, or failing to meet medical eligibility criteria. Gaining a clear understanding of these reasons and addressing them effectively can increase the likelihood of approval.

Incomplete applications often result from errors or missing information. Carefully review the application, correct errors, and submit any omitted details to your caseworker quickly to reverse the denial. Missing documentation, such as proof of income, assets, or residency, is another common issue. Gathering and promptly submitting the required documents may resolve this. Directly contacting your caseworker and providing the required documents as soon as possible can help expedite the resolution process.

Financial denials due to exceeding income or asset limits may require reevaluating finances. In New York, Medicaid offers options like the Medicaid Spend-Down Program or establishing a Qualified Income Trust to help meet eligibility criteria. Consulting a Long Island Medicaid planning attorney can provide guidance on legally reducing assets or setting up trusts to satisfy eligibility criteria. 

If the denial stems from not meeting the functional or medical needs criteria, detailed medical records and a physician’s statement demonstrating the need for care are essential. These documents should clearly demonstrate the medical necessity and eligibility for the type of care requested.

Timely action is critical when challenging a denial. Applicants have a specific window to request a fair hearing. During this hearing, presenting organized documentation and a clear argument for eligibility is key to potentially overturning the decision. Knowing how to address common denial reasons can significantly improve the chances of approval for Long Island residents when reapplying for or appealing a Medicaid decision.

Medicaid Excess Income Program

The Medicaid Excess Income Program allows applicants to avail of Medicaid benefits while also retaining their monthly income even if they don’t necessarily meet the income requirements. If your excess income over the Medicaid level is only enough to cover your medical bills in a month, then Medicaid can provide for your medical bills beyond that excess in your income. This method can be used to pay for outpatient care, doctor and dentist visits, prescription medicine, and even long-term care.

If your income requirements go above the requirement for Medicaid, you may be able to utilize one or more of these methods to help you qualify. However, it is important to remember that the best method that you can use will depend on your financial situation. 

Medicaid 5 Year Look-Back

The Medicaid 5 year look-back period is an essential feature of Medicaid’s financial evaluation procedure. In states like New York, it typically spans 60 months or 5 years. During this period, Medicaid examines your financial transactions to verify your eligibility for Nursing Home Medicaid.

The look-back period’s primary purpose is to confirm that applicants haven’t intentionally transferred or gifted their assets to retain Medicaid eligibility. If such transactions are identified, penalties may apply, including a period of ineligibility for Medicaid.

However, certain assets are exempt from the look-back period. The valuation of these exempt assets won’t negatively impact the financial assessment. These exemptions include the primary residence, where the equity interest is below $955,000, and a primary vehicle, irrespective of its market value, if it’s essential for employment, medical transportation, or modified for a handicapped person.

Additionally, personal effects and household goods such as clothing, jewelry, hobby items, and musical instruments may also be exempted. However, if these items possess significant value, they may be deemed investments rather than personal belongings.

Burial trusts or allowances up to $1,500, 401k and IRAs in payout status, and a life insurance policy with a value of $1,500 are also exempt from the look-back period.

Get the Help of an Experienced Long Island Medicaid Planning Attorney

Before you make a decision, consulting with a skilled Long Island Medicaid planning attorney can help prevent costly mistakes from happening. Your eligibility for government benefits like Medicaid may be jeopardized or you might get subjected to Medicaid’s estate recovery program.

Our top-rated Long Island Medicaid planning attorneys at Schlessel Law recommend planning for Medicaid long before you need it. We understand the financial and emotional strain long-term care planning can have on a family. Seth Schlessel, an experienced Long Island estate planning attorney, has helped families in seeking quality care for their loved ones while also maintaining their legacy. We may be able to help guide you through the often complicated process of applying for Medicaid. We provide skilled and compassionate legal counsel and representation.

Contact us today at (516) 574-9630 or fill out our online form to schedule a consultation with skilled Long Island Medicaid planning attorney Seth Schlessel.

from Schlessel Law https://www.schlessellaw.com/how-to-apply-for-medicaid-on-long-island/

What is a Spousal Lifetime Access Trust?

A Spousal Lifetime Access Trust (SLAT) is a powerful estate planning tool designed to provide financial security for your spouse while also preserving your wealth for future generations. This irrevocable trust allows one spouse, known as the grantor, to transfer assets into the trust, benefiting the other spouse, the beneficiary, during their lifetime. Leveraging a SLAT allows couples to take advantage of gift tax exemptions and reduce the size of their taxable estate, ultimately minimizing estate taxes. Additionally, the assets in a SLAT are protected from creditors, ensuring that your family’s wealth remains intact and secure.

At Schlessel Law PLLC, our experienced NY asset protection lawyers can create customized estate planning solutions, including Spousal Lifetime Access Trusts, tailored to your needs. We understand the challenges of asset protection and are dedicated to helping you achieve financial security for your loved ones. If you’re interested in learning more about how a SLAT can benefit your family, contact Schlessel Law PLLC today at (516) 574-9630 to schedule a consultation. Let us guide you through the process and help you make informed decisions to safeguard your assets and legacy.

Introduction to Spousal Lifetime Access Trusts

Spousal Lifetime Access Trusts (SLATs) are tailored irrevocable trusts designed to benefit your spouse and descendants. These trusts offer a unique blend of asset protection and tax benefits, particularly valuable under New York trust laws. Understanding the purpose and distinct features of a SLAT can help you make informed decisions about estate planning.

Purpose of a Spousal Lifetime Access Trust (SLAT)

A SLAT is established to leverage federal lifetime gift exemptions and minimize estate taxes. In 2024, the federal lifetime gift exemption is $13.61 million, allowing significant tax-free gifting to the SLAT. Transferring assets into the trust means the grantor relinquishes control, while the non-grantor spouse retains access, helping to ensure financial security for the family.

Asset Protection and Estate Reduction

The primary purpose of a SLAT is to reduce the taxable estate of the grantor by making substantial lifetime gifts. This is particularly beneficial for individuals with federally taxable estates. The trust shields these assets from future estate taxes while still providing indirect access through the non-grantor spouse.

Maintaining Access through the Non-Grantor Spouse

Despite giving up control over the assets, the grantor can ensure financial stability as the non-grantor spouse can receive distributions from the SLAT. This safeguard allows for continued support and maintenance of the couple, addressing concerns about asset access.

Inclusion of Descendants

SLATs can be structured to include children and grandchildren as beneficiaries, either concurrently with the non-grantor spouse or as successor beneficiaries. This feature supports multi-generational wealth transfer and estate planning.

Protecting the Surviving Spouse’s Rights and Access

The legal framework of a SLAT should clearly define the terms of access for the surviving spouse. This typically includes stipulations on how and when distributions can be made, which are often limited to the spouse’s needs pertaining to health, education, maintenance, and support (HEMS). This ensures that the surviving spouse can benefit from the assets without compromising the trust’s tax advantages.

Selecting a competent and impartial trustee is vital to managing the trust effectively.  The trustee, whether an individual or institution, is responsible for managing the trust’s assets and making discretionary decisions regarding distributions. This role also includes ensuring the surviving spouse’s needs are met, without jeopardizing the trust’s principal, unless expressly permitted by the trust terms. 

Furthermore, careful drafting to avoid triggering the reciprocal trust doctrine is vital. This legal consideration prevents the IRS from treating two mutually created SLATs as invalid for tax benefits, which could otherwise jeopardize the surviving spouse’s access to the assets. This careful structuring is particularly important in New York, where local estate laws interact with these trusts.

Legal guidance is essential when setting up a SLAT, particularly in New York where state-specific legal considerations may affect the structuring of the trust. An attorney can provide valuable advice on how to structure the trust to adapt to changing circumstances which can prevent future legal challenges and ensure that the surviving spouse’s access to the trust assets remains uninterrupted and secure throughout their lifetime.

How a SLAT Differs from Other Trusts

Understanding the distinct characteristics of a SLAT in comparison to other trusts is crucial for effective estate planning. Here’s how a SLAT stands out:

• Irrevocability: Unlike revocable trusts, a SLAT is irrevocable, meaning the grantor cannot alter or terminate the trust once it is established. This feature provides strong asset protection and tax benefits but requires careful planning and commitment.
• Specific Beneficiary Structure: A SLAT is unique in its primary focus on benefiting the non-grantor spouse while potentially including other family members. This structure differs from other trusts that may not prioritize spousal access or may have different beneficiary configurations.
• Federal Gift Tax Exemption Utilization: SLATs specifically utilize the federal lifetime gift exemption, allowing significant tax-free transfers. This aspect is tailored for those seeking to reduce their taxable estate, a feature not all trusts emphasize.
• Asset Ownership Requirements: Only individually owned assets by the donor spouse can be transferred into a SLAT. Jointly owned assets are ineligible, a distinction that ensures the trust’s benefits are maximized without compromising its structure.

SLATs offer a strategic approach to estate planning, particularly beneficial under New York laws. They are a powerful tool for asset protection and tax management, as they reduce the taxable estate and offer indirect access to assets through the non-grantor spouse. Understanding their purpose and how they differ from other trusts can help you make the best decisions for your estate planning needs.

Feature	SLAT Characteristics
Irrevocability	Irrevocable, cannot be altered or terminated once established, providing strong asset protection and tax benefits.
Specific Beneficiary Structure	Primarily benefits the non-grantor spouse and potentially other family members.
Federal Gift Tax Exemption Utilization	Utilizes the federal lifetime gift exemption for significant tax-free transfers.
Asset Ownership Requirements	Only individually owned assets by the donor spouse can be transferred into a SLAT.

Advantages and Disadvantages of Spousal Lifetime Access Trust

Spousal Lifetime Access Trusts (SLATs) offer a range of benefits and potential drawbacks. Understanding these aspects is essential for making informed decisions about whether a SLAT is the right estate planning tool for you. This section will delve into the key advantages and disadvantages of establishing a SLAT, with a focus on New York trust laws.

Benefits of Establishing a Spousal Lifetime Access Trust

SLATs present several significant advantages for estate planning, particularly under New York’s regulatory framework.

Reduction of Taxable Estate

Transferring assets to a SLAT removes them from your taxable estate. This strategic move can significantly reduce estate tax liability. For instance, transferring $8 million into a SLAT for a spouse means those assets are no longer part of the taxable estate, potentially saving millions in estate taxes.

Lifetime Access for Spouse

The non-grantor spouse, as the primary beneficiary, has access to the trust’s assets during their lifetime. This feature ensures financial security and support for the spouse, which is crucial if the grantor is hesitant to relinquish control over significant assets.

Future Appreciation and Income Tax-Free

Assets in a SLAT can appreciate and generate income without being subject to additional taxes. This benefit allows the family to enjoy the growth and income from the trust assets without immediate tax implications.

Flexibility in Trustee Selection

While the grantor cannot be a beneficiary, they can remove and replace the trustee with an independent trustee. This flexibility ensures that the trust is managed according to the grantor’s wishes and provides an additional layer of control over the trust administration.

Indirect Access to Funds

Even though the grantor cannot directly access the trust assets, they can indirectly benefit through the non-grantor spouse’s access. This arrangement provides a safety net for the grantor while ensuring the spouse’s needs are met.

Potential Drawbacks and Risks

Despite the numerous benefits, SLATs also come with potential risks and disadvantages that must be carefully considered.

Lack of Control

Establishing a SLAT requires the grantor to relinquish direct control over the trust assets. This loss of control can be difficult, as the grantor cannot decide when and how distributions are made. Trust management is entirely in the hands of the appointed trustee, which may be uncomfortable for some individuals.

Impact of Divorce

In the event of a divorce, the indirect access the grantor has through the non-grantor spouse is lost. The ex-spouse continues to benefit from the trust, which can be problematic. However, this risk can be mitigated by including provisions in the trust documents that terminate the ex-spouse’s interest in the event of a divorce.

Loss of Access if Spouse Passes

If the non-grantor spouse dies before the grantor, the grantor loses indirect access to the SLAT assets. This situation can be challenging as the trust can either terminate and distribute funds to other beneficiaries or continue for their benefit. Including provisions that allow the non-grantor spouse to redirect funds to the grantor upon their death can alleviate this risk.

Cost and Challenges

Setting up a SLAT involves legal and financial planning, which can be costly. It requires working with experienced attorneys and financial advisors to ensure compliance with New York laws and to structure the trust effectively.

While SLATs offer substantial benefits in terms of tax savings and asset protection, they also come with certain risks and challenges. It’s crucial to weigh these factors carefully and consult with an experienced estate planning attorney to determine if a SLAT aligns with your financial goals and family dynamics.

Tax Considerations for Spousal Lifetime Access Trust

The nature of Spousal Lifetime Access Trusts (SLATs) involves complicated tax considerations that must be carefully evaluated. Understanding the tax implications of SLATs is crucial for effective estate planning. This section covers the key tax considerations for SLATs under New York trust laws, ensuring you can make informed decisions.

Gifting Limits to a Spousal Lifetime Access Trust

The Tax Cuts and Jobs Act of 2017 (TCJA) significantly increased the federal estate and gift tax exemption from an inflation-adjusted $5 million per person to $10 million per person. For 2024, this exemption allows each individual to gift up to $13.61 million free of federal gift tax. However, this provision is set to expire at the end of 2025, with the exemption reverting back to $5 million per person, adjusted for inflation.

While it may seem like there is ample time to make substantial gifts to a SLAT, it is important to act sooner rather than later. As the 2025 deadline approaches, more individuals will likely seek to take advantage of the higher exemption, potentially overwhelming wealth planners and attorneys. Delaying could result in insufficient time to complete the necessary gifts before the deadline.

Additionally, Congress has the authority to lower the exemption amount at any time before the scheduled expiration date. Therefore, there is a potential “use it or lose it” opportunity to transfer additional wealth free of gift tax.

Annual Income Taxes

SLATs are treated as separate legal entities for ownership purposes but not for income tax purposes. They are typically structured as grantor trusts, meaning the grantor spouse pays the income taxes generated by the trust assets annually.

As a grantor trust, the income generated by the SLAT’s assets, such as dividends, interest, and capital gains, is taxed to the grantor spouse. This arrangement allows the SLAT to grow income tax-free over time, as the trust itself does not pay taxes on its income. It is essential for the grantor spouse to ensure they can comfortably cover this annual tax obligation. While this may seem burdensome, it effectively allows the assets within the SLAT to compound and grow without being diminished by income taxes.

Capital Gains Tax

When assets are gifted into a SLAT, they do not receive a step-up in cost basis at the grantor’s death. This means any appreciation in the value of these assets may be subject to capital gains taxes when sold by the beneficiaries.

Beneficiaries should be aware of potential capital gains tax liabilities if they decide to sell the transferred assets. The original cost basis of the assets will be used to calculate the capital gains, potentially resulting in significant tax obligations. Despite the lack of a step-up in basis, estate tax planning strategies can help defer or even avoid capital gains taxes. Historically, capital gains tax rates have been lower than estate tax rates, making SLATs an advantageous tool for overall tax planning.

Getting the Experienced Legal Help of Schlessel Law PLLC

A spousal lifetime access trust (SLAT) offers a strategic way to protect your assets and provide for your spouse while reducing your estate’s tax burden. This estate planning tool can be a valuable addition to your financial strategy, ensuring that your wealth is preserved for future generations. Exploring the benefits of SLATs can help you make informed decisions that align with your family’s long-term goals and financial security.

At Schlessel Law PLLC, we are committed to providing experienced guidance and personalized estate planning services. Our knowledgeable NY asset protection lawyers are here to help you in establishing a SLAT and other asset protection strategies. Contact us today at (516) 574-9630 to schedule a consultation and take the first step toward securing your family’s financial future.

from Schlessel Law https://www.schlessellaw.com/what-is-a-spousal-lifetime-access-trust/

Pros and Cons of Irrevocable Trust Vs. a Life Estate

Whether you are preparing your own estate plan or helping a parent or loved one with estate planning, matters related to estate law can be challenging. One of the most important aspects of estate planning is determining what happens to one’s assets. Estate planning is a valuable tool for ensuring that assets are transferred or made available to the right person at the right time. With many different options available to protect assets, estate planning can be overwhelming for someone without prior experience.

Among the many estate planning options available, an irrevocable trust and a life estate can be particularly beneficial. However, not all estate plans are the same. Depending on your financial situation, one of these two options may be a better fit for your unique circumstances. Before making a decision, it’s wise to consult with an experienced Long Island estate planning attorney. 

At Schlessel Law, PLLC, our skilled attorneys can help you determine the best option possible for you and your family’s future. We offer personalized guidance tailored to your specific needs and goals. To find the most suitable solution for your situation, contact us today at (516) 574-9630 to schedule a consultation.

What is an Irrevocable Trust?

An irrevocable trust is, like any other trust, a vehicle under which a grantor can place their assets into. As the name suggests, an irrevocable trust is one where the grantor would not be able to modify or end the trust’s terms once it is created. It is important to be specific regarding the language used in creating a trust as it can make or break how useful it is as an estate planning tool. 

Irrevocable trusts can be used in a lot of different ways. Many people use them as a means to avoid paying exorbitant estate taxes or to pay for long-term care while safeguarding their assets. Irrevocable trusts can also be used to protect your assets if you are facing lawsuits from creditors. There is a common misconception that, by putting your assets into an irrevocable trust, you will be forfeiting the ownership of your asset. With a well-executed trust, you can retain ownership of your property while protecting your estate. 

Unlike wills, a trust can also be used to appoint a trustor who can manage the trust’s affairs and distribute assets according to the predetermined terms of the trust.

Creating an irrevocable trust is best left in the hands of an experienced Long Island trusts attorney. A skilled estate planning attorney in Suffolk County or Nassau County on Long Island can make sure that the trust would fit your particular needs and serve your best interests.

Who Owns the Property in an Irrevocable Trust?

In an irrevocable trust, ownership of property is clear and distinct from personal ownership. Once assets are placed into an irrevocable trust, they are legally owned by the trust itself, not by the grantor, trustee, or beneficiaries. This means that the assets are now in the trust’s name and the trust effectively becomes the new owner.

The trustee, responsible for managing the trust, does not own the assets but holds a fiduciary duty to manage them in the best interests of the trust and its beneficiaries. This includes handling the assets according to the specific terms laid out in the trust agreement and ensuring that beneficiaries receive their distributions as intended by the grantor.

Beneficiaries of the trust also do not own the property held in the trust. They are entitled to benefits from the trust, such as income generated from the trust assets or distributions as dictated by the trust terms, but they do not have ownership rights over the assets themselves.

This arrangement ensures that once assets are transferred into an irrevocable trust, they are removed from the grantor’s estate. This separation from the grantor’s personal assets explains why such trusts are often used for estate planning purposes, offering potential tax benefits and protection against creditor claims.

What is the Greatest Advantage of an Irrevocable Trust?

The greatest advantage of an irrevocable trust is its exceptional asset protection. Once established, this type of trust becomes fixed, unable to be altered, amended, or dissolved without the consent of its beneficiaries. Its permanence is key to its effectiveness in safeguarding assets.

By placing assets into an irrevocable trust, they are no longer considered part of the personal property of the trust’s creator, thus providing a shield against creditors, legal actions, and personal disputes like divorce, ensuring the grantor’s financial security. This protection is essential for individuals focused on thorough estate planning and asset preservation.

Additionally, irrevocable trusts offer significant tax advantages. Removing assets from the grantor’s taxable estate can substantially reduce estate taxes at the time of their death. The trust can also be structured to distribute income to its beneficiaries in a tax-efficient manner, enhancing the financial benefits and maximizing the trust’s value as an estate planning tool.

Irrevocable Trust Vs Revocable Trust

A living trust, also known as a revocable trust, offers great flexibility as it can be modified or revoked by the person creating the trust during their lifetime. This type of trust provides several benefits. Firstly, it allows the trustmaker to bypass the probate process when they pass away, ensuring a smoother transfer of assets to the designated beneficiary. Secondly, the trustmaker retains complete control over the trust and its assets until their death. Moreover, if the trustmaker becomes incapacitated, a living trust can protect against conservatorship.

However, it’s important to understand that a revocable trust does not provide asset protection from creditors, assist in maintaining eligibility for government benefits with asset limitations, or shield assets from estate and inheritance taxes. Because the trustmaker maintains control over the trust, the assets are still considered part of their estate for purposes such as Medicaid planning and debt settlement.

On the other hand, an irrevocable trust, as the name suggests, cannot be changed or revoked once it is established. This type of trust offers asset protection by transferring ownership of assets to the trust, effectively removing them from the trustmaker’s estate. This can help safeguard assets from estate taxation, as assets held in an irrevocable trust are not subject to estate taxes. Additionally, an irrevocable trust can protect assets from debt settlement judgments and assist in maintaining eligibility for government programs such as Medicaid and Social Security Disability.

Choosing between a revocable trust and an irrevocable trust depends on your specific estate planning goals. To make an informed decision, it is crucial to seek the guidance of an experienced estate planning attorney in your area, such as a Long Island estate planning attorney. They will assess your individual circumstances and help you determine the most suitable trust type that aligns with your objectives. Additionally, they can assist in structuring the terms of the trust to best suit your needs.

What is a Life Estate?

A life estate is a property, usually a home, that a person owns and is allowed to use for the duration of their life. The owner, called the life tenant, can share the ownership of the property with another person, called the remainderman. The remainderman automatically receives the title to the property when the life tenant passes away.

Life estates are commonly used in the US by people seeking to make sure that their loved ones inherit their property. By creating a life estate, the ownership of the property can pass on to the beneficiaries without the need for a lengthy probate process.

However, by creating the life estate, the owner cannot sell or mortgage the property without the permission of the remainderman. As the remainderman is already locked in to receive the deed of the property, ownership of the property would revert back to the remainderman once the life tenant dies. 

Irrevocable Trusts vs. Life Estate: Benefits

A life estate can be used to gift a property to another person (beneficiary) by splitting the property’s ownership between the receiver and the giver.  The gifter will remain the owner of the property, however, the beneficiary will also have some sort of “ownership” of the property. This allows givers to transfer property easily to beneficiaries and also stay eligible for Medicaid or other low-income programs.

An example of how a life estate function is when a parent creates a life estate in order to meet the required asset limit for Medicaid. The parent will still have a stake in their property, but since the ownership of the property is shared, Medicaid will not see the property as solely owned by the parent.

An irrevocable trust, on the other hand, allows you to put your assets and properties in a trust instead of gifting them to someone else. By transferring assets into the trust, the grantor effectively removes any liabilities they get from the assets. However, in some cases, putting assets into the trust also means giving up control over any profits or income from the assets.

An irrevocable trust can be used to transfer substantial assets, allowing you to qualify for programs like Medicaid and other low-income benefits. For those who have large estates, an irrevocable trust can help lessen estate taxes that may be incurred when the grantor passes away. Instead of spending down their assets, Medicaid applicants can also use an irrevocable trust to protect their assets provided that they do so outside of Medicaid’s Look-back period. New York has a 60-month look-back period for applicants for institutional Medicaid.

A life estate and an irrevocable trust do not have to be exclusive. It is possible to put one property in an irrevocable trust while the others are on a life estate. In such a situation, it is still possible for you to have full control of your property. The two options both allow beneficiaries to avoid probate and each option has its own tax benefits as well.

If you are unsure which option would benefit you the most, it is important to speak to an experienced estate planning lawyer. A skilled lawyer may be able to help you explore all the options available to you. 

Trust Type	Benefits
Irrevocable Trust	Removal of liabilities associated with assets, Qualification for programs like Medicaid and low-income benefits, Reduction of estate taxes for large estates, Protection of assets outside of Medicaid’s Look-back period
Life Estate	Easy transfer of property to beneficiaries, Eligibility for Medicaid or other low-income programs, Shared ownership of the property to meet asset limits

Irrevocable Trusts vs. Life Estate: Drawbacks

In terms of taxes and liabilities, a life estate will not minimize the amount of estate taxes your estate will have to pay to be able to pass your assets to your beneficiaries. If you have significant debt, a life estate will also be unable to prevent creditors from filing a lien on your home. Even though your property is free from any threats of foreclosure while you are alive due to the life estate, creditors can file a claim on your property when you pass away. Creditor protection does not apply to remaindermen in a life estate.

Aside from estate taxes, children in a life estate deed are also at a disadvantage due to the capital gains tax. Under New York law, couples are allowed a capital gains tax exclusion of up to $500,000 on their primary residence. This means that if the parents have lived in their home for at least two years during a five-year period before they sold the house, the sale’s proceeds will not be taxed for the couple. However, their beneficiaries may incur capital gains tax after they receive their part of the proceeds. This is because only their parents have tax exemptions. 

Another drawback of a life estate is that, as mentioned previously, owners or life tenants cannot sell their property without the permission of the remaindermen. This situation can be a cause for distress for parents who have included their children as co-owners. A consensus must be achieved by all parties before the property can be sold.

An irrevocable trust can be a very flexible tool for estate planning. Unlike a life estate, creditors cannot file a lien on property held in an irrevocable trust. They can only do so once the beneficiaries have inherited the property. The trust’s terms can also be customized to fit the needs of both the grantor and the beneficiaries. However, depending on the kind of trust, income taxes might need to be filed to make sure everything is in compliance with the law. 

When creating an irrevocable trust, you will need to account for a lot of contingencies in advance. As an example, it may be necessary to put into writing what should be done with the trust once the initial beneficiaries pass away. It is also important to make sure that the trustee is someone that would have no conflict of interest over the trust and that they understand the responsibility of managing the trust.

Irrevocable Trusts vs. Life Estate: Which should you pick?

The best kind of estate planning tool is one that would fit your specific financial situation. When planning your estate, it is important to carefully consider your goals or what you want to achieve with your estate. This is especially crucial when deciding between using an irrevocable trust or a life estate.

Evaluating your estate and keeping up with estate laws in New York can be an intimidating matter to handle. It can be helpful to consult with a skilled Long Island estate planning attorney who can assist you in ensuring that any documents or decisions you make will be legally binding. A qualified attorney can also prevent mistakes and alert you of any contingencies you might have missed during the planning process.

At Schlessel Law, PLLC experienced Long Island estate planning attorney Seth Schlessel has helped families achieve their goals with their estates. Schlessel Law, PLLC, provides services that may be able to protect your assets and ensure that your beneficiaries are taken care of. 

Contact Schlessel Law, PLLC today at (516) 574-9630 to schedule a consultation with Long Island estate planning attorney Seth Schlessel.

Trust and Will Reviews

Wills and trusts share several similarities, such as facilitating the transfer of property to loved ones after one’s passing and, in some cases, allowing modifications or revocations during the individual’s lifetime. However, the crucial distinction between the two lies in the method of property transfer to beneficiaries.

A trust is a legal document that establishes a fiduciary relationship between the assets and a chosen party, known as the trustee. The trustee assumes the responsibility of managing the assets for the well-being of the beneficiaries, making it a useful strategy to avoid probate. Trusts can be classified into two main types: revocable and irrevocable.

• Revocable trust: Also known as a living trust, permits the grantor to retain full control over the assets in the trust while they are alive.  Since the grantor maintains control, the assets are still subject to estate tax and are considered part of their property.
• Irrevocable trust: Involves transferring assets into the trust and out of the grantor’s estate, typically resulting in the avoidance of estate tax. True to its name, this type of trust cannot be changed or modified, and the grantor willingly gives up control over the assets placed in it.

On the other hand, a will, also referred to as a last will and testament, is a legal document that outlines the instructions for the distribution of a person’s assets and possessions after they pass away. It appoints an executor responsible for managing estate expenses, distributing property to rightful heirs, and handling financial obligations. Additionally, a will designates a guardian for any minor children and dependents.

The probate process verifies the validity of a will and occurs in Surrogate’s Court. Wills may be prone to contests, where parties challenge the document’s validity. To avoid probate and potential challenges, creating a trust is often recommended.

When it comes to securing the future of your assets and loved ones, seeking the assistance of a Long Island estate planning lawyer becomes a crucial step in ensuring peace of mind and proper protection. At Schlessel Law, PLLC, our attorneys can meticulously analyze and update your estate documents, ensuring compliance with current legal requirements and alignment with your circumstances. Contact and schedule a consultation today at (516) 574-9630 and take the first step towards safeguarding your loved ones’ future.

from Schlessel Law https://www.schlessellaw.com/pros-and-cons-of-irrevocable-trust-vs-a-life-estate/

Who Keeps the Original Will on Long Island, New York?

In the course of our lives, it is essential to plan ahead for our loved ones’ financial and emotional well-being when we are no longer around. Creating a will is a vital part of this planning, as it provides clear instructions on how to distribute our assets and handle other matters after our passing. However, having a will is not enough; it is equally important to store the original copy in a safe and secure location. This article explores the significance of a will, its key components, and the various options available for storing it on Long Island, New York. It also outlines the factors to consider when choosing a storage method and the process of retrieving the original will after the testator’s death.

Aside from drafting a will, it is also important to consult an attorney for keeping and securing an original will on Long Island, New York. A will is a legal document that outlines how a person’s assets will be distributed after their death, and if the original will is lost, damaged, or not properly executed, it may result in the assets being distributed in a way that the deceased did not intend. At Schlessel Law, PLLC, our team of experienced lawyers, led by Long Island estate planning attorney Seth Schlessel, understands the importance of allowing individuals the choice of how they want their assets to be distributed in a way that provides clarity and peace of mind for their loved ones. Our team of competent lawyers can ensure that the will is properly executed and provide guidance on any legal requirements that need to be met to ensure the validity of the will. To schedule a free consultation, call us today at (516) 574-9630.

Importance of a Will

A will is an essential legal document that outlines how an individual’s assets and properties will be distributed upon their death. Especially in this age of financial uncertainty, the importance of having a will cannot be overstated.

Moreover, securing and keeping the original will is just as important due to its critical role in ensuring the deceased’s final wishes are carried out accurately and legally. The original will serves as undeniable evidence of the testator’s intentions, providing clarity and preventing disputes among beneficiaries. By safeguarding this crucial document, one can maintain the integrity of the deceased’s estate plan, minimize the risk of fraudulent claims, and preserve the testator’s legacy with the utmost respect and fidelity.

Long Island trust attorney

Definition and Purpose of a Will

A will, also known as a testament, is a legal document that expresses an individual’s wishes as to how their estate should be distributed after their death. It also appoints an executor to administer the estate and carry out the directives stated in the will. The main purpose of a will is to ensure that the deceased’s assets are managed and distributed according to their wishes in the most efficient and accurate way possible.

In some cases, the absence of a valid will can result in disagreements, confusion, and lengthy legal procedures, as the state then steps in to administer the distribution of assets according to intestacy laws. Such laws can vary depending on the place of residency, and might not necessarily distribute the assets in accordance with the deceased’s desires.

Key Components of a Will

According to New York statute, it is mandatory for the testator to be a minimum of 18 years old and possess a state of “sound mind and memory.” Typically, a will must be created in a physical format, specifically on paper. Moreover, to create a legally binding will, certain requirements must be met. While it is advisable to consult with an attorney for specific details and local requirements, the following components are generally necessary:

• Execution of a Will: There are certain requirements that must be met for the proper execution of a will. Firstly, the testator must personally sign the will, or if directed by the testator, another person may sign on their behalf in the presence of the testator. In the latter case, the person signing must also sign the will and provide their address (although the absence of an address does not render the document invalid).
• Witnesses: The signature on the will must be witnessed by at least two individuals. These witnesses can either observe the testator signing the will or receive confirmation from the testator that the signature is indeed theirs. The witnesses should sign the will within a 30-day period from each other, and include their addresses (although the omission of addresses does not invalidate the will).
• Declaration: At some point during the execution and attestation of the will, the testator must inform each witness that the document they have signed is, in fact, their last will and testament.

By including these key components in your will and regularly reviewing it, you can ensure that your final wishes are legally binding and your loved ones are provided for according to your intentions.

Key Components of a Will	Requirements	Details
Execution	Testator signs or directs someone to sign on their behalf in their presence	If the testator is unable to sign, someone else can sign for them if the testator directs them to do so, and the person signs in the testator’s presence. The signature must be at the end of the will.
Witnesses	Two witnesses must sign in the presence of the testator and each other	Witnesses must be present when the testator signs or acknowledges their signature, and they must sign the will in the presence of the testator and each other. Witnesses must also include their full addresses.
Declaration	Testator must declare the document as their last will and testament to the witnesses	The testator must make a clear declaration to the witnesses that the document is their will, and the witnesses must understand that they are witnessing the execution of a will. This declaration can be made before, during, or after the signing of the will.

Benefits of Having a Will

Creating a will has numerous benefits for both the individual and their loved ones. Some of the most notable advantages include:

• Take control of the distribution of your assets after your passing by creating a personalized will. By doing so, you avoid leaving the decision to the state and ensure that the right individuals receive their rightful inheritances. Failing to create a will can result in your assets ending up in the wrong hands.
• Empower yourself to choose a trusted executor who will handle your estate affairs and asset management when you’re no longer around. Through a will, you can designate this person to fulfill important responsibilities such as asset distribution based on your wishes, debt settlement, tax payments, and more. Safeguarding the reliability and trustworthiness of your executor necessitates the creation of a will.
• Prioritize the protection and care of your minor children by appointing a guardian through your will. Recognizing the immense significance of your children in your life, it becomes crucial to ensure their well-being even in your absence. By clearly designating a guardian in your will, you guarantee that your children will be looked after according to your wishes.
• Maintain the flexibility to modify your will while you’re in good health. Have you had a change of heart regarding inheritance or wish to allocate assets to a different beneficiary? Have your financial circumstances or assets undergone alterations? In such cases, it may be necessary to update your will. Remember, a will can be revised at any time when you are alive and well.
• Experience a profound peace of mind for both yourself and your family by having a well-thought-out plan in place. Knowing that you have taken the necessary steps to secure your affairs brings a sense of calm and assurance. Without a will, concerns about the handling of future matters may linger, creating unnecessary worries.

In summary, by taking the time to create a well-crafted will, you may be able to ensure a smooth transition of your estate, provide for your loved ones, and leave a lasting legacy that reflects your values and intentions.

Necessity of Storing the Original Will

A will is a crucial legal document that outlines the distribution of a person’s assets and estate after their death. Proper storage of the original will is essential to ensure that the testator’s wishes are respected and executed accordingly. 

Difference between Original and Photocopies

The original will is the actual document that was signed and dated by the testator in the presence of witnessing parties. The original document carries more significant legal weight and is predominantly required when the court is asked to approve the will as valid, a process known as probate. Photocopies, on the other hand, are exact reproductions of the original document made by a copying machine. They typically do not have the same legal weight and may not be sufficient evidence of a testator’s intentions in probate proceedings.

A photocopy will usually not be considered an authentic will by the probate court, as it lacks essential elements such as original signatures, initials, and dates. Additionally, a photocopy may not accurately represent any alterations or annotations made on the original will after it was initially drafted. In some cases, a testator might have intentionally destroyed the original will to revoke it, and relying on a photocopy can lead to the distribution of the estate against their intended wishes.

Legal Requirements for Presenting the Original Will

When a person dies, the probate court evaluates their will to authenticate it and confirm that it abides by the legal requirements. The original will is usually required in this process, and failure to produce it may lead to significant delays, increased expenses, and potential disputes among beneficiaries.

In New York, a party applying for probate must provide the original will along with relevant application forms and supporting documents. The Surrogate’s Court then examines the will thoroughly to ensure that it meets the requirements such as being in writing, signed and dated by the testator, and witnessed by appropriate parties. Moreover, the court might check for any signs of tampering, alterations, or inconsistencies that might invalidate the will.

If the original will cannot be found or is accidentally destroyed, the probate court may require the party applying for probate to provide substantial evidence to prove that the testator intended the photocopy of the will to be considered as the original. This could entail an exhaustive process, including gathering testimonies from witnesses who saw the testator sign the will or obtaining expert opinions on the authenticity of the photocopy.

Challenges Due to Lost or Damaged Original Will

Losing or damaging the original will can result in several challenges during the probate process, including delays, increased costs, and potential disputes among beneficiaries. Some of the issues that may arise due to a lost or damaged original will include:

• Presumption of Revocation: When an original will cannot be found, the court may assume that the testator intentionally destroyed it to revoke its provisions. This assumption can only be overturned with strong evidence to prove that the will was never revoked.
• Burden of Proof: If the original will is missing or damaged, the party applying for probate must produce extensive evidence to prove the validity of a photocopy, if available. As mentioned earlier, this may involve testimonies from witnesses, expert opinions, and comparisons with other documents signed by the testator.
• Disputes among Beneficiaries: When a will is lost or damaged, it may create doubts among beneficiaries about the testator’s intentions. This situation might lead to disputes, litigation, and a prolonged probate process, adversely impacting the estate’s distribution and the relationships among the beneficiaries.

Safeguarding the original will and ensuring its accessibility after the testator’s death is essential to avoid numerous challenges and complications that may arise due to a lost or damaged original will.

Options to Store Original Will on Long Island

Creating a will is an essential step in estate planning. However, the existence of a will is of little value if it cannot be located after the testator’s death. Properly storing the will is crucial to ensure that the testator’s assets and possessions are distributed according to their wishes. There are several options for storing an original will, and each has its advantages and drawbacks. This article discusses four common storage options on Long Island, New York: at home, in a safe deposit box at a bank, with an attorney, and at New York’s Surrogate’s Court.

At Home

Some people may choose to store their will at home, which can be convenient but also fraught with risks. A fireproof, waterproof safe should be used to protect the document from damage, theft, or accidents. Burglary, fire, or natural disasters could result in damage or loss of the will. Moreover, the will’s location should be communicated to a trusted family member, executor, or friend to prevent it from being misplaced or overlooked.

One advantage of keeping the will at home is that it is readily accessible, making it easier to update or review when necessary. However, storing a will at home is generally not the best option, especially if the testator is concerned about confidentiality or the risk of the document being lost or damaged.

Safe Deposit Box at a Bank

Safe deposit boxes at banks are commonly used for securing valuable documents, including wills. These boxes offer greater security than storing at home, protecting the will from theft, fire, and other disasters. They also provide a level of confidentiality since only authorized individuals can access the box.

However, there are potential pitfalls to using a safe deposit box for storing a will. In some cases, the safe deposit box may be inaccessible to the family or executor until the bank receives proper authorization. This could cause delays in the probate process, as the bank may require a court order to grant access to the safe deposit box. Additionally, renting a safe deposit box incurs a recurring fee, which may not be desirable for all individuals.

Entrusting to an Attorney

Entrusting the will to an attorney offers several benefits, including convenience, security, and professional management. An attorney who has drafted the will is often the best choice for this option since they are already familiar with the testator’s estate plan. Attorneys are typically required to maintain a safe and secure location for storing clients’ original documents, thereby ensuring the will’s protection. Additionally, assigning the attorney as the executor of the estate can streamline the probate process.

There are some potential disadvantages to this arrangement as well, such as the attorney retiring, relocating, or passing away. To counter this, the testator should ensure they have a clear understanding of the attorney’s document-storage practices and ensure that their personal representative or a trusted family member knows the attorney’s contact information. This combination of security and accessibility typically makes leaving a will with an attorney a favorable option.

New York’s Surrogate’s Court

Another option specific to New York State is the Surrogate’s Court Filing System. The Surrogate’s Court is responsible for overseeing the probate process, making it an appropriate institution for storing original wills. For a one-time fee, the court will store the will in a secure location, providing both protection and accessibility. The court will also issue a receipt for the will, which should be kept in a safe place as it serves as proof of the will’s existence.

While this option provides the added security of a court institution and ensures access for authorized individuals, it may not be the most convenient choice for individuals looking to revise or review their will regularly. Additionally, the will’s location should be communicated to a trusted person to ensure it is not forgotten or overlooked.

In conclusion, there are several options for storing an original will on Long Island. These options include at home, in a safe deposit box at a bank, with an attorney, and at the New York Surrogate’s Court. Each option has its advantages and disadvantages, so individuals should carefully weigh their preferences and consider the level of security and accessibility that best suits their needs.

Retrieve the Original Will After a Testator’s Death

Retrieving the original will after a testator’s death is an essential part of initiating the probate process. The executor, an attorney, or a storage facility may be responsible for locating and preserving the will, depending on where it was kept. Here, we will discuss the process and responsibilities of each party and further steps required for administering the testator’s estate.

Process for Executors

As an executor of an estate, it is crucial to locate and access the original will as promptly as possible. This task typically involves the following steps.

1. Finding and Accessing the Original Will: The executor should start by searching the testator’s personal belongings and important documents. Common storage places include a safe deposit box in a bank, a home safe or fireproof box, or a secure filing cabinet. The testator may have also informed the executor or other trusted individuals about the will’s whereabouts. If the will is not found in the testator’s possession, it could be held by an attorney or at a specialized storage facility. The executor should contact the testator’s attorney, financial planners, or tax advisors to inquire about any knowledge of the will.
2. Submitting the Will to the Surrogate’s Court: Once the original will is located, the executor must submit it to the Surrogate’s Court to initiate the probate process. The court typically requires the will, proof of the testator’s death (such as a death certificate), and other essential documents. The executor may also need to provide their photo identification and contact information. It is essential to consult with an attorney to ensure compliance with all applicable probate procedures and requirements.
3. Probate Process: The probate process involves validating the will, identifying and informing creditors and beneficiaries, paying outstanding debts and taxes, and ultimately distributing the assets as per the will. The executor is also responsible for managing the estate throughout the probate process, which may include filing necessary documents, providing notifications to interested parties, and accounting for the estate’s assets and liabilities.

Navigating the process of locating the original will and initiating the probate process can be complex, but with careful attention to detail and compliance with all relevant procedures and requirements, the executor can fulfill their duties with confidence.

Responsibilities of the Attorney or Storage Facility

If the original will is held by an attorney or a storage facility, they also have vital responsibilities to fulfill upon the testator’s death.

Notifying Executors and Beneficiaries

Upon the testator’s death, the attorney or storage facility must notify the executor or other interested parties (such as beneficiaries) about the will’s existence and location. They will also need to provide the necessary information or documents to the executor to facilitate the estate administration process.

If the testator has not specified an executor or beneficiaries, the attorney or storage facility might need to take additional actions. They may need to search for and contact potential heirs, perform an investigation in coordination with the local court system, or inform relevant government agencies or financial institutions.

Releasing the Original Will

The attorney or storage facility should release the original will to the executor or their designated agents upon providing proper identification and proof of the testator’s death. In some circumstances, the holder of the will may be required to deliver the original will to the Surrogate’s Court or other competent authorities.

It is essential for the will holder to preserve the will’s safety and confidentiality throughout this process. They must also ensure compliance with all applicable laws, regulations, and professional responsibilities governing the handling of wills and deceased clients’ affairs.

Schedule a Consultation with our Top-Rated Long Island Estate Planning Attorneys at Schlessel Law, PLLC

Our experienced Long Island estate planning attorneys at Schlessel Law, PLLC, led by Seth Schlessel, understand the importance of keeping an original will securely to protect it from loss, damage, tampering, and to facilitate a smooth probate process. Storing an original will properly can help preserve the testator’s intentions and ensures that their wishes are fulfilled as intended. Our legal team can provide guidance on ways to properly store and secure the will to ensure its safety and accessibility when needed. Our attorneys can also help prevent disputes or challenges to the validity of the will in the future. If you would like to explore how we can assist you with your will, contact us at (516) 574-9630 to arrange a complimentary consultation.

source https://www.schlessellaw.com/who-keeps-the-original-will-on-long-island-new-york/

Biggest Mistakes Parents Make When Setting Up a Trust Fund

Trust funds in New York are highly regarded as versatile financial tools that individuals, families, and organizations utilize for sound financial management and strategic long-term planning. With their inherent flexibility, trust funds offer many benefits, including asset protection, wealth preservation, tax optimization, and the ability to support philanthropic endeavors. In New York’s dynamic financial landscape, trusts stand as an essential mechanism for effectively managing wealth and achieving various financial objectives.

However, creating a trust is not a one-and-done scenario. Getting the help of an experienced Long Island trusts attorney can be beneficial in ensuring that your trust is aligned with your estate planning goals. At Schlessel Law, PLLC, skilled Long Island estate planning lawyer Seth Schlessel and his team of legal professionals can conduct a comprehensive evaluation of your situation and help you navigate the process of creating a trust. We can also help evaluate which type of trust such as an irrevocable trust or a life estate may be applicable in your case. To learn more about how we can help you, contact us today at (516) 574-9630.

What is a Trust Fund?

A trust fund is a legal and financial arrangement that allows a third party or trustee to manage and hold assets on behalf of one or more beneficiaries. The person or entity that creates the trust is called the grantor or settlor. The purpose of a trust fund is to provide a structured means of managing and distributing assets for the benefit of the named beneficiaries, according to the terms set by the grantor.

Assets that can be placed in a trust fund include, but are not limited to, cash, stocks, bonds, real estate, and life insurance policies. Trust funds can be customized to meet specific needs and goals, such as providing for the education of children, supporting a family member with special needs, or funding a charitable organization.

Types of Trust Funds

There are various types of trust funds, each offering unique features and benefits depending on the grantor’s objectives. Some common types of trust funds include:

Revocable Trusts

A revocable trust, also known as a living trust, is an arrangement in which the grantor retains the right to alter, amend or terminate the trust during their lifetime. This type of trust provides flexibility for the grantor, as they can make changes according to their needs and circumstances. However, revocable trusts do not offer the same level of asset protection and tax advantages as irrevocable trusts.

Irrevocable Trusts

An irrevocable trust is one in which the grantor relinquishes control and rights to the assets placed in the trust, and the trust cannot be modified or terminated without the permission of the beneficiaries. Irrevocable trusts offer significant asset protection and tax advantages since the assets are no longer considered part of the grantor’s estate. This type of trust can be beneficial in reducing estate taxes and safeguarding assets from potential creditors and lawsuits.

Long Island estate planning lawyer

Living Trusts

A living trust, also known as an inter vivos trust, is established during the grantor’s lifetime and may be either revocable or irrevocable. The primary benefits of a living trust include the avoidance of probate, privacy of the trust’s terms, and the ability to manage and distribute assets according to the grantor’s wishes in the event of incapacity.

Testamentary Trusts

A testamentary trust, also referred to as a will trust, is created within the grantor’s will to take effect after their death. This type of trust can help provide for minor children, ensuring that assets are distributed according to the grantor’s wishes, and offering asset protection for beneficiaries who may not be responsible enough to manage their inheritance.

Benefits of Setting Up a Trust Fund

Trust funds offer numerous advantages, including:

• Asset protection: Trust funds can safeguard assets from litigation, creditors, and spendthrift heirs.
• Estate tax reduction: By removing assets from the grantor’s estate, trust funds can help minimize estate taxes.
• Avoiding probate: Trust funds enable a timely and private transfer of assets to beneficiaries, bypassing the often lengthy and public probate process.
• Control and flexibility: Trusts can be tailored to meet specific needs and objectives, stipulating when, how, and under what conditions assets are distributed to beneficiaries.
• Support for beneficiaries: A trust fund can provide for the well-being of family members, including education and healthcare expenses, as well as support for charitable causes.

New York State Trust Law Basics

New York trust law is governed by the state’s Consolidated Laws, including the Estates, Powers, and Trusts Law (EPTL) and the Surrogate’s Court Procedure Act (SCPA). Key factors to consider in the establishment and administration of trust funds in New York include:

• Formalities: Creating a valid trust in New York requires a written document containing a clear declaration of trust, identification of beneficiaries, and specific provisions for the management and distribution of assets.
• Trustee appointment: New York law requires the appointment of a trustee, who must be at least 18 years old and capable of fulfilling the legal duties and responsibilities that come with managing a trust.
• Statute of limitations: New York trust law includes various deadlines for contesting trusts, filing claims against trust assets, and disputing trustee actions.
• Trust accounting and reporting: New York trustees must maintain accurate records and provide periodic account statements to beneficiaries regarding the trust’s assets and transactions.

Before establishing a trust fund in New York, it is essential to consult with an experienced estate planning attorney to ensure compliance with state laws and the creation of a trust that meets your specific needs and objectives.

Common Mistakes Made by Parents

When parents decide to establish a trust for their child or children, they often have the best of intentions. A trust can provide financial stability and a safeguard for the future. However, there are several common mistakes parents make when setting up trusts that can complicate matters and potentially cause financial troubles to the intended beneficiary. 

Not Properly Assessing the Purpose of the Trust

One of the most important aspects of creating a trust is determining its purpose. Parents need to decide what they want the trust to achieve and how it will benefit their child or children. It’s essential to have a clear understanding of the trust’s objectives, whether it’s to provide for education expenses, cover living expenses, or pass along assets to future generations.

Parents should also consider the child’s age, needs, and potential future financial circumstances when outlining the trust’s purpose. By thoroughly assessing these factors, parents can establish a trust that truly meets their child’s needs, rather than creating a restrictive or inefficient trust arrangement.

Choosing the Wrong Type of Trust

There are numerous types of trusts, each designed to serve specific purposes and offer various benefits. Some of the most common trust types include revocable and irrevocable trusts, living trusts, and testamentary trusts. Parents should consult with an experienced attorney or financial advisor to help determine the ideal type of trust for their child’s needs.

Choosing the wrong type of trust can result in unnecessary expenses or undesirable consequences for the beneficiary. For example, some trusts are subject to higher taxes or may not provide the intended level of asset protection. Parents should take the time to research and understand the different types of trusts available to them before making a decision.

Selecting an Inappropriate Trustee

Selecting the right trustee is critical to the successful administration of a trust. Trustees have significant responsibilities and must act in the best interests of the trust’s beneficiaries. Unfortunately, some parents choose a trustee based on personal relationships or convenience rather than their ability to effectively manage the trust.

When selecting a trustee, parents should consider their potential appointee’s financial acumen, experience, and willingness to take on the role’s responsibilities. In some cases, it may be prudent to appoint a professional trustee, such as a bank or trust company, to provide added experience and impartiality in administering the trust.

Failing to Fund the Trust

A trust is only beneficial if it is properly funded. Parents must ensure that they transfer the appropriate assets into the trust, either during their lifetime or upon their death. Without proper funding, the trust can’t fulfill its intended purpose, and the beneficiary may not receive the intended financial support.

To avoid this issue, parents should work with experienced professionals to properly title assets in the trust’s name and make provisions in their estate plan for funding the trust in the event of their death.

Failing to Keep the Trust Updated

A trust is not a static document. As circumstances and laws change, it’s important for parents to review and update the trust to ensure it continues to meet the beneficiary’s needs and remains compliant with current regulations.

Parents should periodically review their trust with a qualified attorney, particularly after significant life events such as marriage, divorce, or the birth of additional children. Maintaining an up-to-date trust can help avoid disputes or complications that may arise from outdated or unclear provisions.

Inadequately Planning for Taxes and Expenses

Taxes and expenses related to trusts can be complex and may impact the trust’s ability to fulfill its intended purpose. Parents should work with an attorney or financial advisor to ensure that they have properly accounted for potential taxes, fees, and other expenses associated with the trust.

This may include planning for the payment of estate taxes, considering the tax implications of distributing trust assets, or ensuring that the trust has sufficient funds to cover ongoing expenses and fees. Parents should also understand that trusts are subject to different tax rules and rates than individuals or corporations, so careful planning and professional guidance are essential in navigating these issues.

Common Mistakes Made by Parents	Implications	Recommendations
Not Properly Assessing the Purpose of the Trust	Creating a restrictive or inefficient trust arrangement	Thoroughly assess the child’s needs, age, and potential future financial circumstances
Choosing the Wrong Type of Trust	Unnecessary expenses or undesirable consequences	Consult with an experienced attorney or financial advisor to determine the ideal type of trust
Selecting an Inappropriate Trustee	Ineffective management of the trust	Consider appointing a professional trustee with financial acumen and experience
Failing to Fund the Trust	Trust cannot fulfill its intended purpose	Work with professionals to properly transfer assets into the trust and plan for funding in the future
Failing to Keep the Trust Updated	Disputes or complications from outdated provisions	Periodically review and update the trust with an attorney, especially after significant life events
Inadequately Planning for Taxes and Expenses	Inability to fulfill the trust’s purpose	Work with an attorney or financial advisor to account for potential taxes, fees, and expenses

Effective Trust Fund Planning for Parents

Trust funds can be a powerful tool for parents to ensure their children’s financial future, providing ongoing financial support, education, healthcare, and other important aspects of a well-rounded life. Effective trust fund planning includes several key components: identifying long-term goals for the trust, seeking professional assistance, allocating assets to fund the trust, periodically reviewing and updating the trust, and educating beneficiaries about trust fund responsibilities.

Identifying Long-term Goals for the Trust Fund

Before establishing a trust fund, parents must clarify their objectives for the trust. What are the desired outcomes? Are there specific educational, financial, or personal milestones to be achieved? Identifying long-term goals for the trust fund will help parents design the trust in a way that aligns with their ultimate wishes for their children.

To provide a solid foundation for trust fund planning, parents should consider a few factors. First, estimate the total amount needed to fund the trust and the timeline required for it to mature. Then, establish any restrictions or limitations to be placed on the trust, such as disbursements only for educational expenses or investments in sustainable businesses. Finally, determine the types of assets to be included in the trust and the order in which they will be liquidated or distributed.

Seeking Professional Assistance

For many parents, trust fund planning can be a complex process. It is essential to seek assistance from professionals with expertise in this area. Consider working with financial advisors, estate planning attorneys, and tax professionals who specialize in trust funds.

Financial advisors can provide guidance on the types of investments and strategies to use for generating income and preserving capital within the trust. Claims too not guaranteed. They can also suggest the best ways to fund the trust, such as using life insurance policies or setting up a family-limited partnership.

Estate planning attorneys can help parents navigate the legal intricacies of trust fund creation, administration, and distribution. They will work with parents to draft the necessary documents, including the trust agreement, to clearly outline trust terms and conditions.

Tax professionals are essential in understanding the complex tax implications of trust fund creation and distribution. They will help minimize any tax burden associated with the trust and ensure compliance with all relevant tax regulations.

Allocating Assets to Fund the Trust

Parents should consider the types of assets they can use to fund the trust. Some options include cash, stocks, bonds, real estate, life insurance policies, retirement accounts, and business interests. The choice of assets will depend on various factors, such as the parents’ financial situation, the intended purpose of the trust, and potential tax implications.

It is important to carefully evaluate the assets’ current value and future growth potential when allocating them to the trust. This is where the assistance of a financial advisor or a trusts attorney can be invaluable. By diversifying the trust’s assets, parents can minimize risk and create a more balanced investment strategy.

Periodically Reviewing and Updating the Trust

As circumstances change over time, parents should review and update the trust to reflect their current situation and intentions. Major life events like marriage, divorce, the birth of additional children, or the death of a family member can necessitate modifications to the trust.

Periodic reviews should also assess the trust’s investment performance and align it with long-term objectives. Evaluating the trust’s asset allocation and making adjustments as needed may be key to ensuring ongoing trust fund success.

Educating Beneficiaries about Trust Fund Responsibilities

Finally, parents must educate their children about the responsibilities that come with being trust fund beneficiaries. Providing a solid understanding of trust fund management and the purpose behind the trust can help prevent potential disputes and ensure the responsible use of the funds.

Open and ongoing communication with beneficiaries is essential for the successful functioning of the trust. Educate young beneficiaries about budgeting, financial planning, and investment strategies as they grow older to prepare them for the responsibility of managing their trust fund.

In conclusion, effective trust fund planning is a vital aspect of securing a financially stable future for your children. By following these steps and working with the right professionals, parents can create a trust fund plan that delivers on their long-term objectives and expectations.

Tips for Avoiding Common Trust Fund Mistakes

Establishing a trust can be an effective way to transfer wealth and protect your financial legacy. However, mistakes can lead to complications and potential disputes among beneficiaries. To ensure the smooth administration of a trust, consider these tips for avoiding common trust fund mistakes.

Creating a Well-defined Trust Distribution Plan

Clearly defining your trust distribution plan is essential. Ambiguity in trust instructions can lead to misunderstandings and disputes among beneficiaries, increasing the likelihood of a legal challenge. To prevent this, ensure that specific details about the trust assets are included in the trust document. Be very clear about the conditions under which assets or income will be distributed to beneficiaries. For example, you might specify that a beneficiary must reach a certain age, complete a specific educational milestone, or undergo substance abuse counseling before receiving their inheritance.

Additionally, it’s essential to balance flexibility with control. A well-drafted trust should allow for amendments or adjustments, as needed, while still maintaining the grantor’s original intent. This balance can be achieved by incorporating mechanisms like a trust protector, who can modify the trust as circumstances change, or by using discretionary trusts that give the trustee decision-making power regarding distributions.

Attending to Required Legal Formalities

Trusts must be established and executed according to applicable laws and regulations to be valid and legally enforceable. This means that you should seek the advice of a qualified New York estate planning attorney to ensure the trust document is accurate and reliable. Formally executing the trust typically includes having the document notarized and witnessed by independent third parties.

Furthermore, it is essential to fund the trust correctly by transferring assets (like real estate or investment accounts) into the trust’s name. Properly funding the trust ensures that the assets will be protected and managed according to the trust’s terms.

Considering the Beneficiaries’ Needs and Circumstances

When designing a trust, be sure to consider the unique needs and circumstances of each beneficiary. One size does not fit all, so it may be wise to develop customized trust provisions tailored to each beneficiary’s situation. This might include special provisions for beneficiaries with disabilities, addiction issues, or considerable financial inheritance.

It may also be wise to prepare a letter of intent outlining your wishes, values, and vision for the trust. This document can serve as a valuable guide for the trustee and provides context for the trust’s goals and purpose.

Real-life Trust Fund Mistakes and Their Consequences

Unfortunately, not all trust fund setups end successfully. The following examples illustrate some common mistakes and the resultant negative consequences.

Breaches of Fiduciary Duty

Fiduciary duty is a legal obligation for a trustee to act in the best interests of the trust’s beneficiaries. However, there have been cases where trustees have acted for their personal benefit at the expense of the beneficiaries. For instance, a trustee may mismanage trust assets, fail to make timely distributions, or make unauthorized expenses. Such breaches of fiduciary duty can significantly undermine the integrity and performance of the trust fund and often lead to legal disputes.

Taxation Pitfalls

Inadequate planning for tax implications is another common mistake in trust fund setups. For example, if a trust is not structured properly, it may be subject to high tax rates, which can ultimately reduce the funds available for beneficiaries. Additionally, failure to file appropriate tax returns in accordance with taxation laws can result in severe penalties and possibly litigation.

Conflict and Litigation among Beneficiaries

Unclear or ambiguous trust terms can lead to conflicts among beneficiaries, who may disagree on the interpretation of the trust provisions. Such conflicts can result in costly and time-consuming litigation, which could hurt the trust’s value and the relationships among family members.

Working with an Experienced Long Island Trusts Attorney

Long Island trusts attorneys who possess extensive knowledge and experience in trust fund matters emphasize the critical role of involving experienced legal and financial professionals throughout the process. These professionals understand that thorough planning, precise drafting, and ongoing maintenance are vital for the establishment of a successful trust fund. By proactively identifying and addressing potential issues early on, both grantors and beneficiaries can benefit from a well-structured and effectively managed trust fund.

The complexities of trust law and the ever-evolving legal landscape require the assistance of skilled Long Island trusts attorneys. These professionals possess in-depth familiarity with New York state laws and regulations concerning trusts, enabling them to navigate the intricate legal framework with confidence. By working closely with a knowledgeable attorney, individuals and families can ensure that their trust fund is established in full compliance with applicable laws and maximizes its intended benefits.

Additionally, experienced Long Island trusts attorneys bring practical insights to the table. They possess a deep understanding of the financial intricacies involved in trust fund management, including considerations related to taxes, investments, and asset protection. This comprehensive understanding allows them to customize the trust fund to align with the specific needs and goals of the grantor and beneficiaries.

One of the primary advantages of involving a skilled trusts attorney is their ability to anticipate and mitigate potential challenges. Through a thorough analysis of the grantor’s financial situation, family dynamics, and long-term objectives, the attorney can identify any possible obstacles that may arise during the trust’s lifespan. They can incorporate safeguards and provisions within the trust document to protect the interests of the beneficiaries and ensure the grantor’s wishes are faithfully fulfilled.

Moreover, an experienced Long Island trusts attorney provides ongoing guidance and support throughout the life of the trust. They assist with the administration of the trust, including tasks such as asset management, reporting, and compliance with legal requirements. This ongoing involvement ensures that the trust remains aligned with changing circumstances, regulations, and the evolving needs of the beneficiaries.

At Schlessel Law, PLLC, we leverage our combined experience to provide practical legal solutions to parents seeking to safeguard their children’s future through the establishment of trust funds. We believe that trust funds are not only for the wealthy but also for those who want to provide financial security to their loved ones. We take the time to conduct a financial evaluation of your estate planning goals, introduce alternative options, and assist you in making an informed decision. Contact us today to schedule a consultation at (516) 574-9630.

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