Many people are confused about the estate planning document that they should use to facilitate asset transfers to their loved ones. There is a simple will, and there are different types of trusts, and this can lead to the search for the “best” legal device.
This is natural, but there is no asset transfer vehicle that is inherently better than another in a general sense. The matter is akin to the selection of a golf club. A putter is definitely the best club when you are on the green, but it is not the right choice when you are teeing off.
With this in mind, we will explain some of the most commonly used estate planning tools in this post.
Simple Will
The will is an asset transfer vehicle that is really not the right choice unless the situation is extremely simple and straightforward and there are limited assets involved.
One of limitations is the fact that you would be allowing for the distribution of lump sum inheritances to the people that are named in the will. There would be no safeguards or asset protection if you are leaving an inheritance to someone that is not good with money.
A will must be admitted to probate, which is a legal process that takes place under the supervision of the Surrogate’s Court. It serves a purpose, because creditors can come forward seeking payment, and it opens a window of opportunity for will challenges.
This being stated, it is problematic for the heirs to an estate. It will typically take about nine months at minimum to run its course, and no inheritances are distributed during this interim.
Probate expenses consume a portion of the estate before it is distributed, and it is a public proceeding, so the records are available to anyone that is interested.
Revocable Living Trust
When you hear about the negatives that go along with the use of a will, you will naturally ask about alternatives, and the living trust fits the bill. Distributions to the beneficiaries are not subject to probate when you use a living trust, and this is a major advantage.
You do not have to worry about losing control of the assets while you are living, because you would act as the trustee, and this would be a revocable trust. If you change your mind and decide that you want to dissolve the trust, you can do so at any time.
Another benefit is the ability to provide spendthrift protections. You can include a spendthrift provision, and the principal would be protected from the beneficiaries’ creditors after your passing.
In the trust declaration, you can instruct the trustee to spread out the distributions to the beneficiaries over time to limit the beneficiary’s ability to spend freely.
Incentive Trust
Another trust that can be used to provide protections is the incentive trust. As the name would indicate, you include incentives that must be met before distributions from the trust would be made.
For example, you could instruct the trustee to pay tuition and all other expenses as long as the beneficiary remains in college. You can subsequently compel the trustee to provide dollar for dollar matches of money earned on the job after graduation.
Irrevocable Trusts
In addition to the revocable living trust, there are irrevocable trusts that are used when there is a reason to get assets out of your name. People that are exposed to federal and/or state estate taxes use these trusts, and you can use an irrevocable trust as part of a nursing home asset protection plan.
With regard to the nursing home utilization, Medicare does not pay for the custodial care that these facilities provide. Medicaid will cover the costs, but you cannot qualify if you are in direct possession of significant assets.
Schedule a Consultation Today!
As you can see, there are many different tools in the estate planning toolkit. When you work with our firm, we will gain an understanding of your situation and provide recommendations so you can make fully informed decisions.
At the end of the process, you will come away with a custom crafted plan that ideally suits your needs.
If you are ready to get started, you can schedule an appointment at our New York city estate planning office if you call us at 212- 973-0100. There is also a contact form on this site you can use to send us a message, and if you reach out electronically, you will receive a swift response.
While he was in law school, he worked as an aide to the late John Sparkman, Senior Senator from Alabama. This gave him the opportunity to gain intimate knowledge of the workings of government, and this background has served him well.
He started his private practice in New York in 1974, the first Sikh to be admitted to the bar in the state of New York.And in 1995, when he narrowed his legal focus to the areas of estate planning and elder law, the prestigious American Academy of Estate Planning Attorneys accepted him into their membership.
Special needs planning is an important aspect of the field, and Mr. Khalsa has intertwined his empathy with his expertise to become a leading advocate in this area. Shortly after the Education for All Handicapped Children Act was enacted in 1975, he won the first case in New York that was adjudicated under this law.
S.J. Khalsa has a penchant for philanthropy, and he has raised well over $20 million for charities nationwide. He is a deeply spiritual man who represents the Sikh religion at religious and interfaith gatherings all over the globe.
He believes that successful professionals should contribute to the fabric of their communities, and to this end, he works with law enforcement in New York.
Mr. Khalsa is a graduate of the FBI Citizens Academy program, and he is active in their Alumni Association. He is a member of the FBI/New York Police Department Joint Task Forces on Civil Rights and Hate Crimes, and he sits on the Community Engagement Council that advises the FBI Assistant Director for New York.
He is the author of the highly acclaimed book, Estate Planning Essentials: A Guidebook for Modern Families. Lawyers of Distinction recognized him for his excellence in 2020, naming him a 2020 Power Lawyer, and he is a member of the prestigious American Academy of Estate Planning Attorneys.
Mr. Khalsa lives in Manhattan with his wife, and he has two grown children and four grandchildren. He likes to travel, and he is an avid golfer. As the co-owner of Kundalini Yoga East in New York along with his wife, he instructs practitioners and aspiring yoga teachers.
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