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Revocable Living Trusts vs Wills: Choosing the Right Estate Planning Tool in New York

Mar 18, 2024
Practice Area:  Trusts & Estates
Contributor:   Melissa K. Lee  |  Steven E. Glass

Estate planning plays a critical role in ensuring that your assets are managed and distributed according to your wishes upon your death. In New York, two commonly used estate planning tools are wills and revocable living trusts. It is important to understand the difference between these two estate planning tools and compare their advantages and disadvantages before deciding on whether you need (or want) a will or a trust.

What Is a Revocable Living Trust?

A revocable living trust is a legal instrument in which you, as the grantor (the creator), establish the trust and determine the terms for how your assets are managed and distributed, both during your lifetime and upon your death. You, as the grantor transfer your assets such as cash, property, or investments into your trust during your lifetime for the benefit of yourself or your loved ones. Generally, you will also decide to act as the initial trustee so you can manage the assets in the trust during your lifetime. It is possible to appoint another person(s) along with you to act as the initial trustee to ensure that your assets will continue to be managed according to your wishes during your lifetime if something unexpected were to happen to cause you to become incapacitated.

You retain the ability to modify or revoke the trust during your lifetime. Upon your death, the trust becomes irrevocable, and your co-trustee or successor trustee will continue to manage the assets in the trust and follow your instructions on distribution to your beneficiaries.

Benefits of a Revocable Living Trust

Avoiding Probate: By transferring assets into a trust during your lifetime, those assets are not subject to probate through the Surrogate’s Court, which can be a time-consuming and costly process. The Surrogate’s Court has the authority to supervise as the administration of your estate throughout the entire probate process, including from the marshaling of your assets, payment of your final expenses, and to the distribution of your assets to your beneficiaries.

Providing Privacy: Unlike a will, a trust document is not entered into public records, which allows a more private distribution of assets. Only interested parties will be able to see your trust document.

Planning for Incapacity: Besides providing instruction upon your death, the trust can also provide instructions on managing your assets if you are incapacitated during your lifetime. Your assets will continue to be managed by your trustee until you are no longer incapacitated which provides a seamless transition during this precarious time.

Drawbacks of a Revocable Living Trust

Cost: Establishing a trust can be more costly than having a will prepared. For example, if you wish to transfer your interest in a cooperative apartment to your trust, there may be fees required by the board for the transfer application process. Additional legal fees and administrative cost can be incurred in the management of the trust.

Funding the Trust: For a trust to be properly funded, assets must be retitled into the name of the trust, which requires administrative efforts on your part.

What Is a Will?

A last will and testament, commonly referred to as a will, is a legal document that outlines your wishes regarding the distribution of your assets upon your death. You must name an executor, who is the person you trust to carry out the instructions in your will. Your executor will be tasked with managing your estate upon your death, pay any of your outstanding debts, and distribute your assets according to your wishes. The will is only effective upon your death and must be offered for probate with the Surrogate’s Court.

Benefits of a Will

Simplicity and Cost-Effectiveness: Creating a will is generally simpler and less costly than creating a trust as you will not need to transfer any of your assets during your lifetime.

Under New York law, if you were to die without a valid will, your estate will be distributed according to the New York intestacy laws, which may not align with your wishes. A will allows you to easily specify how your assets should be distributed and ensure that your assets go to your intended beneficiaries. It may also help prevent any disputes among your family members as opposed to if you were to suddenly die without a will.

Appointment of a Guardian: If you have minor children or expect to have children, you may designate a guardian in your will. This ensures that if the worst were to happen to you and your spouse or partner, your child will be looked after by someone you trust.

Drawbacks of a Will

Lengthy Probate Process: In order for your executor to perform their fiduciary duties, they must first submit a probate petition asking the Surrogate’s Court to grant them the authority to act on behalf of your estate. Generally, the process of having a will admitted to probate will take at least four to six months for the Surrogate’s Court to grant your executor Letters Testamentary. After the executor is formally appointed, then he or she goes about the task of collecting your assets, paying estate expenses, and distributing the estate assets to your named beneficiaries.

Public Nature: A will becomes a public document and accessible to anyone looking through the court records. On the contrary, a trust can only be seen by interested parties.

What Are the Key Differences Between a Trust and a Will?

A will outlines your wishes regarding the distribution of your assets upon your death and also allows you to appoint a guardian for your minor children. It is only effective upon your death and its admission to probate by the Surrogate’s Court.

A trust allows you to transfer your assets to a trustee to hold and manage for the benefit of yourself or someone else. It may be used during your lifetime to manage your assets and avoid probate upon your death thus allowing for the timely distribution of your assets to your intended beneficiaries.

Should You Choose a Revocable Living Trust or a Will?

If you are having a hard time deciding between having a will or a living trust, one approach is to start with a will first and then decide to create a trust at a future date so that you do not find yourself in a position of having no estate planning documents at all.

However, choosing between a will or a trust depends on your circumstances and goals. To explore how these estate planning tools may be tailored for your specific needs and objectives, contact an experienced estate planning attorney.

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