Trusts: Frequently Asked Questions

A trust is a legal arrangement where one person holds and manages property for the benefit of others. It follows written instructions you set out in the trust document.

Every trust has three roles. The creator, also called the grantor, sets up the trust and puts property into it. The trustee manages that property. The beneficiaries receive the benefit of it. One person can fill more than one role. In a typical revocable living trust, you are the creator, the trustee, and the beneficiary while you are alive. The document names who takes over as trustee later and who receives the property after your death. In New York, a trust controls only the assets actually moved into it. That is why moving assets into the trust, called “funding,” matters as much as signing the document.

Illustration: Maria, 68, of Queens, creates a trust and retitles her $600,000 brokerage account into it. She manages the account herself as trustee. Her daughter is named to take over if Maria cannot.

A revocable trust can be changed or canceled by the person who created it. An irrevocable trust generally cannot be changed without the consent of the people who benefit from it.

With a revocable trust, you keep control. You can add or remove assets, change beneficiaries, or end the trust. Because you keep control, the law still treats the assets as yours for income tax, estate tax, and creditor purposes. 

An irrevocable trust works differently. You give up control so the trust can do things a revocable trust cannot, such as help with certain tax or Medicaid goals. In New York, a lifetime trust is irrevocable unless the document clearly says it is revocable. Changing an irrevocable trust usually requires the written, notarized consent of everyone with a beneficial interest in it.

Choosing the right type at the start helps avoid costly fixes later.

A revocable living trust is a trust you create during your lifetime, manage yourself, and can change at any time. At your death, it passes the assets in the trust to the people you choose without probate for those assets.

“Living” means the trust is created while you are alive, not through your will. You usually serve as your own trustee and keep full use of your property. You also name a successor trustee, a person or institution who takes over if you can no longer manage your affairs or after your death. The trust covers only assets you transfer into it. A revocable trust does not lower estate taxes by itself, and it does not protect assets from your own creditors. Its main benefits are avoiding probate for funded assets, privacy, and smooth management if you become ill.

Illustration: Ben and Ruth, both 72, of Brooklyn, transfer their $1,200,000 co-op and $400,000 in savings into their revocable trust. Their son is the successor trustee. After both parents pass away, he distributes those assets under the trust’s terms without opening a probate case for them.

Not everyone needs a trust. A will alone works well for many families, but a trust can do some things a will cannot.

A will takes effect only after death, and it must go through probate in the Surrogate’s Court before your executor can act. A will does nothing if you become unable to manage your affairs. A trust can help if you own real estate, want to avoid probate, value privacy, have a family member with a disability, have children from a prior marriage, or want to control how and when your heirs receive money. Most people with a trust still sign a short will, often called a “pour-over will,” to catch any assets left outside the trust.

Reviewing this question before a health crisis gives you more options.

A New York lifetime trust must be in writing and signed by the creator, and by at least one trustee unless the creator is the only trustee, either in front of a notary or in front of two witnesses. It must also be funded.

New York has specific signing rules. The signatures must be acknowledged, meaning signed before a notary in the same way a deed is signed for recording, or signed in front of two witnesses who also sign the document. The trust is irrevocable unless it expressly says it can be revoked. Signing is only half the job. The trust is valid only for assets actually transferred into it. Online templates can miss these steps, and a mistake may not come to light until after death, when it is hardest to fix.

Having an attorney supervise both the signing and the funding reduces the risk of problems later.

Choose someone honest, organized, and able to work fairly with your family. Many people choose a family member, a trusted friend, a professional, or a bank or trust company.

While you are alive and well, you are usually your own trustee. The bigger decision is your successor trustee. This person may manage investments, pay bills, file tax returns, keep records, and make distributions. A trustee has a legal duty to act in the best interests of the beneficiaries. Think about how your children get along. Naming one child over another, or naming two who do not cooperate, can create conflict. You can also name backups, co-trustees, or a professional trustee to serve alongside a family member.

Illustration: The Chens of Forest Hills have three adult children; two live out of state. They name the daughter who lives nearby as successor trustee and their son as backup, and they explain the choice to all three children in advance.

Talking openly about this choice now is one of the best ways to prevent disputes later.

Probate is the court process that confirms a will and gives an executor authority to collect and distribute assets. Assets held in a properly funded trust generally pass without probate.

In New York, probate takes place in the Surrogate’s Court in the county where the person lived. It usually involves filing a petition, notifying family members, appointing the executor, gathering assets, paying debts and taxes, and distributing what is left. How long it takes depends on the estate and the court. Assets titled in a trust belong to the trust, so the successor trustee can manage and distribute them under the trust’s terms without that court process. The trustee still has work to do, including paying final bills and taxes, keeping records, and informing beneficiaries.

Illustration: A Manhattan widow retitled her $900,000 apartment to her trust but left a $150,000 brokerage account in her own name. The apartment passes under the trust. The brokerage account may still need to go through the Surrogate’s Court.

A trust is generally more private than a will. Probate requires filing the will and related papers with the court, while a trust is usually handled without those filings.

When a trust is administered outside of court, the trust document, the list of assets, and who receives what generally stay within the family. There are limits. Deeds recorded in the land records still show the trust as the owner of real estate. If a family member challenges the trust, or a trustee is asked to account in court, details can become part of a court file. For many New York families, especially those with sensitive family situations, this privacy is a meaningful benefit.

Your successor trustee steps in and manages the trust assets under the instructions you wrote, without a court proceeding for those assets.

The trust document usually explains how incapacity is determined, often through letters from one or two doctors. Once that happens, the successor trustee can pay your bills, manage investments, and use trust funds for your care. Without planning, a family may need to ask a court to appoint a guardian, which can take time, cost money, and involve ongoing court oversight. A trust covers only assets in the trust. You still need a durable power of attorney for assets outside it, such as retirement accounts, and a health care proxy for medical decisions.

Illustration: When David, 80, of Staten Island develops dementia, his niece, as successor trustee, uses the $300,000 in his trust to pay his home aide. His agent under a power of attorney handles his IRA.

Putting these documents in place while you are healthy keeps the decisions in your hands.

A trust controls only the assets that are actually transferred into it. An unfunded trust can leave your family facing the same probate process the trust was meant to avoid.

Funding means putting assets in the trust’s name. Examples include recording a new deed, retitling a brokerage account, or changing the owner of a bank account. New York law says a lifetime trust is valid as to assets only to the extent they have been transferred to it. Many families sign a trust and never finish this step. New assets need attention too, such as a new account or an inherited property. Funding is not a one-time task; it should be checked whenever you buy, sell, or open accounts.

Illustration: A Westchester couple signed a trust in 2018 but never deeded their $800,000 house to it. When the surviving spouse dies, the house may need to pass through the Surrogate’s Court despite the trust.

A funding checklist at signing, and a review every few years, keeps the plan working as intended.

No. Some assets pass directly to named beneficiaries, and some, like retirement accounts, are handled through beneficiary designations rather than by changing ownership.

Assets that typically go into a revocable trust include real estate, co-op shares, brokerage accounts, and bank accounts. Retirement accounts such as IRAs and 401(k)s, life insurance, and annuities pass to the beneficiaries you name on the account forms. Bank accounts set up as “payable on death” or “in trust for” a named person also pass directly to that person. The key is coordination. Beneficiary forms override your trust and your will, so an outdated form can send money to the wrong person. In some cases, naming the trust as beneficiary makes sense, for example when a child is young or has a disability.

Reviewing every account and beneficiary form together makes sure the whole plan works as one.

Generally, yes. Federal law limits a lender’s ability to call your loan due when you transfer your home into a lifetime trust, as long as certain conditions are met.

The Garn-St Germain Act protects transfers of homes with fewer than five dwelling units, including co-op shares, into a lifetime trust where the borrower is and remains a beneficiary, and where the transfer does not relate to a transfer of the right to occupy the home. This protection may not apply if you are not a beneficiary of the trust, as with many irrevocable trusts, or if the building has five or more units. Co-ops add another step: the co-op board and the proprietary lease may have their own rules about transfers to trusts. Your title insurance and homeowner’s insurance should also be reviewed.

Checking with your lender, co-op board, and insurer before the transfer avoids surprises.

A revocable trust does not protect your assets from your own creditors in New York. Some trusts created for you by someone else can offer protection, within limits.

New York law says a trust created for your own use is void as against your existing and future creditors. If you can take the money back, your creditors can generally reach it too. Trusts created and funded by another person, such as a parent leaving money in trust for a child, are generally protected from the child’s creditors while the property stays in the trust, with some exceptions. Transfers made to avoid creditors can be undone under New York’s voidable transactions law. Protection depends on timing, how the trust is written, and who funded it.

Illustration: A mother in the Bronx leaves $500,000 in a trust for her son, a surgeon. Because she created and funded it, his future creditors generally cannot reach the trust property while it remains in trust. If he had set up the same trust for himself with his own money, they could.

This kind of planning works best before any claim exists.

Some trusts can. A revocable trust alone does not, because the assets stay in your taxable estate.

For deaths in 2026, the federal estate tax exclusion is $15,000,000 per person, and New York’s is $7,350,000. New York also has a “cliff.” If a New York taxable estate is more than 105% of the exclusion, which is $7,717,500 in 2026, the exclusion stops helping and the entire estate can be taxed. Certain gifts made within three years of death are added back. Irrevocable trusts and trusts for married couples, such as a credit shelter trust created at the first spouse’s death, are common tools for managing estate tax. Both exclusion amounts change over time.

Illustration: A Long Island widower dies in 2026 with an $8,000,000 estate. He owes no federal estate tax, because $8,000,000 is below the $15,000,000 federal exclusion. But his estate is above New York’s 105% threshold of $7,717,500, so New York’s exclusion does not reduce his New York estate tax.

Reviewing your plan as your assets and the law change helps avoid an unexpected tax bill.

An irrevocable trust, often called a Medicaid asset protection trust, can be part of Medicaid planning in New York, but timing rules apply.

For nursing home Medicaid, New York reviews transfers made in the 60 months before you apply, including transfers into trusts. A transfer inside that window can result in a period when Medicaid will not pay for care. New York law also cancels any trust clause that cuts off or redirects your interest if you apply for Medicaid, regardless of the trust’s purpose. For home care, often called Community Medicaid, New York passed a law in 2020 creating a 30-month look-back, which needed federal approval that the state requested in 2021. Please ask us about its current status before relying on it.

Illustration: Ann, 70, of Queens, transfers her $700,000 house into a properly drafted irrevocable trust in 2026. If she applies for nursing home Medicaid more than 60 months later, that transfer falls outside the look-back period.

Because the look-back is measured in years, starting early gives your family more choices.

For a revocable trust, you do. The income is reported on your own tax return. For many irrevocable trusts, the trust pays the tax on income it keeps, and beneficiaries pay the tax on income paid out to them.

Federal tax law treats you as the owner of a trust you can revoke. So interest, dividends, and gains on trust assets go on your personal return while you are alive. After your death, the trust becomes irrevocable and may need its own tax return. An irrevocable trust that is not treated as yours files its own return, Form 1041. When it pays income out to beneficiaries, the trust takes a deduction and the beneficiaries report that income on their own returns. Some irrevocable trusts are written on purpose so the creator keeps paying the income tax.

Illustration: Grace, 65, of Manhattan, has $1,000,000 in a revocable trust that earns $40,000 in dividends in 2026. She reports the $40,000 on her own 2026 Form 1040.

Coordinating with your accountant when you set up a trust avoids filing surprises later.

There are many kinds of trusts, each built for a different goal. Only a consultation with an attorney who understands your family, assets, and goals can determine which one, if any, you need.

Common types include:

1. Revocable living trust: manages your assets during life and passes funded assets at death without probate.
2. Irrevocable trust: a general term for a trust you cannot easily change, used for tax, protection, or Medicaid goals.
3. Medicaid asset protection trust: an irrevocable trust used to plan ahead for long-term care costs.
4. Third-party supplemental needs trust: funded by family for a person with a disability, designed to add to, not replace, government benefits.
5. First-party supplemental needs trust: holds a disabled person’s own money, such as a lawsuit settlement, under special rules.
6. Pooled trust: a supplemental needs trust managed by a nonprofit that pools accounts for many people with disabilities.
7. Testamentary trust: created inside your will; it begins only after death and probate.
8. Credit shelter (bypass) trust: used by married couples to make use of the first spouse’s estate tax exclusion.
9. Marital (QTIP) trust: provides for a surviving spouse while controlling who inherits later, common in blended families.
10. Irrevocable life insurance trust (ILIT): owns life insurance so the proceeds can stay outside your taxable estate.
11. Spousal lifetime access trust (SLAT): an irrevocable trust for your spouse that moves assets out of your estate.
12. Charitable remainder trust: pays income to you or your family for a period, then leaves the rest to charity.
13. Grantor retained annuity trust (GRAT): pays you a set amount for a term and passes future growth to your heirs.
14. Qualified personal residence trust (QPRT): transfers your home to heirs while you keep living there for a set term.
15. Pet trust: provides for the care of a pet after your death.

The right choice depends on what you want to accomplish: avoiding probate, protecting a child with special needs, managing taxes, planning for long-term care, or keeping peace in a blended family. Many families need one trust, not several. A trust that fits poorly can add cost, tax problems, or family conflict.

If your trust is revocable, yes. You can amend it in writing, signed with the same formalities used to create it. An irrevocable trust is much harder to change.

In New York, an amendment to a revocable trust must be in writing, signed by the person the trust authorizes, and notarized or witnessed the same way as the original, unless the trust document says otherwise. Handwritten notes in the margin or unsigned letters do not meet these rules. An irrevocable trust can generally be changed or ended only with the written, notarized consent of everyone with a beneficial interest, or through other procedures the law allows. Good times to review your trust include a marriage, divorce, birth, death, move, or change in the law.

Illustration: After their daughter marries in 2026, a Brooklyn couple amends their revocable trust to provide for future grandchildren, signing the amendment before a notary.

A review every few years keeps your plan matched to your family.