A lot of people come to an estate planning lawyer in the Rochester, New York area and want to, for example, to have their lawyer help them create a living trust. While there is nothing wrong with wanting a living trust, or any other type of trust for that matter, you need to first know what different trusts do before you can decide which one type is good for you.
Proper estate planning in New York means that you have to match your individual needs with the appropriate estate planning tool. As part of this process, it’s important to understand why lawyers use different terms when they describe different types of trusts.
More Than Just Living Trusts
An ideal estate plan is one that is perfectly tailored to your current situation, but also one that anticipates your future needs. So many estate planning lawyers in New York counsel their clients to create revocable living trusts because these tools are so useful.
When your lawyer says “revocable living trust,” he or she isn’t using that term just because it sounds good. These are very specific types of trusts that serve specific purposes.
All revocable trusts have terms that you can change. When you create a revocable trust you, the grantor, can update those terms or revoke the trust when you like. If you make a trust with terms that cannot be changed, this is known as an irrevocable trust.
A living trust takes effect while you are still alive. If you create a trust through your last will and testament, these are known as testamentary trusts. Unlike living trusts in New York, a testamentary trust only takes effect after you die.
Simple or Complex Trusts
Apart from the time when your trust takes effect and whether you retain the ability to change the trust terms, trusts can also be complex or simple. However, this distinction relies not on the legal effect the trust has, but rather how the Internal Revenue Service categorizes the trust.
Though the distinction is a little complicated, a simple trust is one where the trust proceeds or incomes are paid directly to the beneficiaries. With a complex trust, some or all of the trust proceeds do not have to go to the beneficiaries.
This effectively means that living, testamentary, revocable, and irrevocable trusts can all be either simple or complex depending on the circumstances.
Knowing what trust terms mean and what kinds of trusts are available to you is an excellent first step to take. Your next step should be to contact a local estate planning attorney so you can receive advice about the steps you need to take to meet your individual needs.