WHY DO I NEED A TRUST? Estate Planning

In today’s modern society there are new challenges popping up every single day in the world of Estate Law that NY Estate Lawyers are charged with solving. Invariably most clients ask why they need a will, which is when I respond by telling them all the reasons in intricate detail. However for clients with more complicated needs I tell them there is an estate plan for almost any estate scenario. A more sophisticated estate plan will start with a will but often require more elaborate solutions in the form of trusts.

Problem: For example, suppose Client A is divorced from Wife B and they have three children together. Client A later remarries Wife C, who is considerably younger than Client A.

GoalClient A would like to leave behind enough money for Wife C to be comfortable for the remainder of her life while providing for Client A’s three children.

SolutionState Qualified Terminable Trust (QTIP)

Client A can create a QTIP trust. A QTIP trust is unique in that it allows the first spouse to pass, the power to control the disposition of their property after the death of the surviving spouse. This is called a terminable interest, which means the second wife’s interest in the trust would terminate when she passed. A NY Times article titled “Beyond the Grave” recently discussed the benefits of maintaining this control in further detail. As you can see from the example above this is particularly advantageous in our modern society for people with children from prior marriages. Here Client Awould place the majority of principal from his estate into a State Qualified Terminable Trust for his Second Wife C, allowing her to live off the income from that principal for the remainder of her life. Once Wife C passes, her terminable interest ends, and the remaining principal in the QTIP trust would pass directly to Client A’s children pursuant to the terms of the trust.

Not only is the QTIP trust invaluable under the scenario above, it is also a vital way to protect the interests of your children if you pass and your spouse remarries. As experienced NY estate lawyers we see nightmare scenarios where stepfathers and stepmothers will try to steal the inheritance from the children of a deceased spouse right out from under them. In NY the best way to stop such opportunism is with a valid attorney drafted will and trust.

As you see above the benefits of trusts are not just limited to high net wealth individuals. A QTIP Trust is also advantageous in that it protects the marital deduction for the surviving spouse unlike other types of trusts. The marital deduction in New York State shields a surviving spouse from all estate tax liability after their spouse passes by deferring the tax liability until the death of the surviving spouse. This is an advantageous tool used by NY Estate lawyers when planning estates. This entitles the surviving spouse to the added benefit, whose income will be derived from the value of the principal in the trust, by receiving the principal tax-free. One catch is that both the spouse and surviving spouse must be U.S. Citizens. An additional benefit of the QTIP trust is if the surviving spouse moves to a State with no State Estate Tax the principal may be shielded from NYS estate tax liability when it passes to the distributees unless the trust includes real property in NYS.

Our firm is comprised of the best NY estate lawyers in the field. We work with financial experts ensuring that your personal wealth is shielded from NY estate tax liability and is transferred to its intended beneficiaries. If you or a loved one are in need of estate planning assistance or have an inquiry, call the Law Offices of Jason W. Stern & Associates at (718) 261-2444 for a free consult.

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