Asset Protection Using Trusts in New York

Is asset protection using trusts right for you?

You and your spouse have worked hard all your lives. You’ve scrimped and saved so that you could enjoy your retirement, pay for medical expenses and still be able to leave something to your loved ones after you’re gone. Unfortunately, the steps you’ve taken may not be enough to really protect yourself and the property that you have worked so hard to earn.

Isn’t a Trust Just for Rich People?

Say the words, “trust fund,” and it conjures up pictures of ultra-wealthy families who have dozens of homes and a wealth of stocks and bonds. The reality is that trusts can be wonderful asset protection tools for individuals and couples across New York regardless of their income level.

The more you understand about assets and how to protect them with a trust, the clearer it will be that establishing a trust may be the most convenient, effective and inexpensive way to protect yourself and the assets that you want to leave to your family.

Defining Assets

An asset is any resource that has economic value. In relation to estate planning, an asset may be real estate like the family home, cars, bonds, stocks, bank accounts, pensions, retirement plans and brokerage accounts. It may be possible to protect any or all of these assets with a trust.

People may lose any of these assets if they are not properly protected with a trust. Here are a few of the ways in which people may lose assets:

Demands from Creditors:

When you owe money to a person or business, these creditors have many remedies that they can use to collect on that debt. It is always wise to establish a trust early for certain assets to protect them from creditors. This is because trying to set up a trust after you are behind on payments to creditors may cause issues with the validity of the trust. Additionally, it is critical that you establish the right kind of trust. In this case, an irrevocable trust is appropriate, while a revocable trust will not provide the protection you need.

Protection from Lawsuits:

Whether a lawsuit is related to a car accident that you caused or a dispute between a vendor and your business, it may be possible for a plaintiff to go after your personal assets. If those assets aren’t protected by a trust, then they are vulnerable. Once again, it is essential to establish an irrevocable trust before a lawsuit is filed. Otherwise, the court may determine that the trust was set up to defraud the plaintiff.

Death and Probate:

Wills are popular and useful estate planning instruments. However, they come with significant disadvantages. One of the most glaring of these is the requirement for the will to go through probate after your death. This process can take months, and it is not unusual to have the proceedings marred by family disagreements, creditor demands and failures to adhere to your wishes. Establishing a revocable trust completely avoids the expensive probate process, resulting in bequests that are quickly and smoothly transferred to beneficiaries.

The Irrevocable Trust vs. the Revocable Trust

If you establish a revocable trust, then it’s possible for you to amend it at any time. This means that you can do things like adding or subtracting assets from the trust or changing the beneficiary. An irrevocable trust is one that you cannot change after the paperwork has been signed. You cannot add or remove property, nor can you change the beneficiary. In fact, all assets included in the trust are now the property of the trust and not yours.

While a revocable trust allows you to retain ownership of your assets, it does not protect them from creditors or lawsuits. Additionally, the assets will be part of your estate after you die, so they may be subject to state and federal estate taxes.

Nonetheless, a revocable trust helps you to plan for mental disability or incapacity. It also lets you avoid probate, and the trust documents remain private even after your death.

With an irrevocable trust, you get total asset protection from creditors and lawsuits because you don’t own the assets any longer. No estate taxes apply to these assets upon your death. It also is worth considering that setting up an irrevocable trust may make you eligible for government assistance like Medicare and Medicaid.

What Kind of Trust Is Right for You?

With many different kinds of trusts, it is difficult for people to know which one is right for them. New York residents are encouraged to contact the Law Office of Kyle Steller PLLC to learn more. Ms. Steller is an experienced elder law and estate planning attorney who focuses her practice on protecting assets and planning for the future.

Consult with an Elder Law Attorney

Fill our form to schedule a free consultation with an experienced Elder Law Attorney. If you need guidance with wills, trusts, medicaid planning, asset protection or any other service Kyle Steller provides. Kyle serves families and individuals in Ulster County, Dutchess County and throughout the Hudson Valley of New York. Schedule your consultation using the form here, or call Kyle at 845-489-8712