When it comes to estate planning in New York State, two common legal instruments that individuals often consider are wills and trusts. Both serve important roles in the distribution and management of assets, but they differ in their structure, requirements, and functions. In this article, we explore the distinctions between wills and trusts in New York and explain some of their purposes and potential benefits.
What Is a Will?
A will, also known as a last will and testament, is a legal document that states how a person wants certain assets distributed after death. A will may also nominate an executor to administer the estate and a guardian for minor children. A guardian nomination is an important expression of the parent’s wishes, although the court ultimately makes its appointment based on the child’s best interests.
A will becomes effective upon the testator’s death. If the person leaves probate assets governed by the will, the will generally must be admitted to probate by the Surrogate’s Court before the executor receives authority to administer those assets.
Requirements for a Will in New York State
- Testamentary Capacity: The testator must be at least 18 years old and possess the required mental capacity when executing the will.
- Written and Signed: The will generally must be in writing and signed at the end by the testator, or by another person in the testator’s presence and at the testator’s direction.
- Declaration and Witnesses: The testator must declare to each witness that the document is their will. At least two witnesses must attest to the testator’s signature and sign at the testator’s request within the same 30-day period.
- Executor: A will may nominate an executor to administer the estate. If the nominated executor is unable or ineligible to serve, the Surrogate’s Court may appoint another eligible fiduciary.
Potential Advantages of a Will
- Accessibility: A will is often less complex to establish than a trust, although it must still satisfy New York’s execution requirements.
- Control Over Distribution: Subject to applicable law—including spousal rights, creditor claims, taxes, and other restrictions—a will allows the testator to direct how probate assets will be distributed.
- Guardian Nomination: Parents can use a will to nominate a guardian for minor children, although the court retains authority to determine what is in the children’s best interests.
- Executor Nomination: A will allows the testator to nominate the person or institution they would like to administer the estate.
What Is a Trust?
A trust is a legal arrangement under which a trustee holds and manages property for one or more beneficiaries according to the terms of a trust instrument. The person establishing and funding the trust is commonly called the grantor or settlor.
Trusts may be revocable or irrevocable. A lifetime trust is created during the grantor’s lifetime, while a testamentary trust is created under a will and takes effect after death. Different forms of trusts serve different purposes and have different legal and tax consequences.
Requirements for a Trust in New York State
- Written Instrument: A New York lifetime trust must be created in writing.
- Proper Execution: The trust must be executed and acknowledged by the person creating it and, unless that person is the sole trustee, by at least one trustee. Alternatively, it may be executed in the presence of two witnesses who sign the instrument.
- Trustee and Beneficiaries: The trust instrument should identify the trustee, the beneficiaries, and the terms governing the management and distribution of trust property.
- Funding: Assets generally must be properly transferred or titled to the trust for the trust to control them.
Potential Advantages of a Trust
- Potential Probate Avoidance: Assets properly transferred to a living trust may pass according to the trust’s terms without probate. Assets left outside the trust may still require probate, and a testamentary trust created through a will does not avoid probate.
- Privacy: A living trust is not ordinarily filed for probate in the same way as a will. However, trust information may still be disclosed when required by law, during litigation, or as part of trust administration.
- Management and Distribution: A trust can contain detailed instructions governing how and when assets are managed and distributed to beneficiaries.
- Incapacity Planning: A properly drafted and funded revocable living trust may allow a successor trustee to manage trust assets if the grantor becomes incapacitated. Additional planning documents may still be needed, and a trust does not guarantee that a guardianship proceeding will never be necessary.
Why Choose a Qualified Professional for Your Estate Planning Needs?
When it comes to estate planning in New York State, it is important to work with a knowledgeable professional who understands this area of law. Some reasons to seek assistance from a qualified estate planning attorney include:
Knowledge of New York Law: Estate planning involves legal requirements, tax considerations, beneficiary designations, property ownership, and other issues. An attorney can help ensure that your documents are properly prepared and executed.
Individualized Advice: Each person’s estate planning needs are different. An attorney can review your assets, family circumstances, intended beneficiaries, and long-term goals before recommending an appropriate plan.
Reducing Errors and Disputes: Estate planning documents must be drafted and executed correctly. Ambiguous language, improper execution, or failure to fund a trust can undermine the plan and lead to disputes.
Responding to Changes: Estate planning laws and personal circumstances can change. Periodic legal reviews can help ensure that an estate plan continues to reflect current law and the individual’s wishes.
Coordinating the Complete Plan: A will or trust is only one part of an estate plan. An attorney can help coordinate beneficiary designations, jointly owned property, powers of attorney, health care documents, and other planning tools.
Planning for the future is an important step toward ensuring that your assets are managed and distributed according to your wishes. Cole, Sorrentino, Hurley, Hewner & Gambino, P.C. can help you evaluate whether a will, trust, or combination of estate planning tools is appropriate for your situation.
The Role of Probate
Probate is the legal process through which a will is presented to the Surrogate’s Court and determined to be valid. In New York, the proceeding generally takes place in the county where the deceased person was domiciled. After the will is admitted to probate, the court may issue letters testamentary authorizing the executor to administer the probate estate.
Estate administration may involve identifying and collecting assets, addressing valid debts and expenses, filing required tax returns, maintaining appropriate records, and distributing the remaining property according to the will and applicable law.
Probate and estate administration can involve court fees, professional expenses, and delays. However, the time and expense vary considerably depending on the estate’s size, assets, debts, beneficiaries, disputes, and other circumstances.
Not every asset is controlled by a will or passes through probate. Depending on how they are structured, jointly owned property with survivorship rights, life insurance with a valid beneficiary designation, retirement accounts with designated beneficiaries, payable-on-death accounts, and assets properly transferred to a living trust may pass outside probate.
Differences Between Wills and Trusts
A will generally takes effect at death and governs probate assets. A lifetime trust can operate while the grantor is alive and may continue after the grantor’s death. Assets properly transferred to a living trust may avoid probate, while assets controlled by a will generally pass through the probate process.
Privacy is another possible distinction. A will admitted to probate generally becomes part of the court record. A living trust ordinarily is not filed for probate, although its terms may still need to be disclosed to beneficiaries, taxing authorities, courts, or other parties under certain circumstances.
Trusts can provide detailed instructions for managing and distributing property. For example, a trust may direct that assets be used for a beneficiary’s health, education, maintenance, or support. Similar ongoing management can also be established through a testamentary trust contained in a will, although that trust begins only after death and probate.
Trusts may be more complex and expensive to establish and administer than a basic will. A living trust must also be properly funded and maintained. Creating a trust document without transferring the intended assets to it may prevent the plan from working as expected.
Legal Requirements for Wills and Trusts in New York
Creating a valid will in New York requires compliance with specific statutory formalities. The testator generally must be at least 18 years old and possess testamentary capacity. The will must be written, signed at the end, declared to be the testator’s will, and properly attested by at least two witnesses within the required 30-day period.
A person who benefits under a will should generally not serve as a witness without legal advice. An interested witness does not automatically invalidate the entire will, but the witness’s disposition may be affected by New York law.
A New York lifetime trust must also comply with statutory execution requirements. The trust must be written and properly acknowledged or witnessed. In addition, the intended assets must be transferred or titled to the trust when funding is required. An irrevocable trust can have significant legal, tax, and financial consequences because the grantor may give up control over transferred assets.
Because different wills and trusts serve different purposes, the appropriate choice depends on the individual’s assets, family circumstances, tax concerns, privacy goals, and intended method of distribution.
Contact Our Estate Planning Attorneys
Understanding the differences between a will and a trust can help you make informed decisions about your estate plan. While wills can provide a comparatively straightforward way to direct probate assets and nominate fiduciaries, properly created and funded trusts may offer additional management, privacy, probate-avoidance, and incapacity-planning benefits.
Cole, Sorrentino, Hurley, Hewner & Gambino, P.C. can help you create an estate plan suited to your circumstances and objectives. Contact us to schedule a consultation and discuss the steps you can take to protect your family and legacy.
Learn more about Thomas F. Hewner, whose practice includes wills, trusts, and estate planning.