What do I need to know about trusts in New York State?

Factual Questions
1

So apparently my father, before his recent death, transferred the bulk of his assets into a trust, making his previous will (of which my noncommunicative brother is the executor) pretty meaningless. I know jack-squat about trusts, but my brother tells me that the bulk of the assets in the trust that will be distributed will be the proceeds of the sale of Dad’s apartment, which will likely be put on the market shortly. (A major reason for the creation of the trust was to allow the sale of the apartment without waiting for probate, because it would be throwing money down the drain to have to pay the mortgage and co-op fees for an empty apartment.)

So how do trusts work, and at what point can I expect to find out what’s going on in more detail? It sometimes takes my brother weeks to return phone calls, if indeed he ever does at all, so there are definitely aspects of this whole experience that I am not looking forward to. Under what circumstances would I be entitled to see the trust documentation, for example? Is there anything else I should know? I don’t think my brother would necessarily do anything underhanded, but he hasn’t exactly been forthcoming with information, either (which is status quo for him).

2

In broad brush, the trust, like a will, will specify who gets what, or at least what percentage. In the several states I am familiar with in some detail (albeit not NY), the trust beneficiaries are entitled by law to a copy of the trust document(s). Common, but not universal, clauses within trusts will also require the trustee(s) to provide various detailed accountings to the beneficiaries along the way and at distribution.

A key “advantage” of trusts is the lack of court supervision / oversight. That lets things move at the pace the trustee(s) want, not obstructed by courts. And in private, so no prying eyes are reading the public records. That also enables obstructionist, dishonest, or scatterbrained trustees to dissemble indefinitely with no easy recourse by frustrated beneficiaries. You can pay a lawyer to get pushy w Bro through the courts, but as a paralegal yourself you can readily see where that probably leads.

Would’ve been nice if Dad had delivered copies to everyone before he passed. Playing his cards face up would have been better for his family.

3

Many things about the past year would have been nice, but didn’t happen. Would have been nice to have copies of Dad’s advance directives, too, even if I wasn’t the health care proxy, so we could advocate for him when my brother overruled them, but that’s water under the bridge at this point. But Dad made his bed on that one, literally.

4

I’m sorry you’re having to deal with the aftermath of bad planning poorly executed. There is small solace in knowing so very many families go through the same unnecessary ordeal. You’re far from alone, but it’s a shitty club to have to join.

Good luck. Seriously, not snarkily.

5

Well, it does give me motivation to deal with this crap for myself. I really need to get on that.

6

Me too.

I had everything solidly squared away along with my late first wife as you might imagine. My new wife is avoidant on all this stuff. And I’m a bit reluctant to “fix” all my stuff for my changed circumstances while hers is still a mess. For married couples if it a joint journey needing, or at least benefitting greatly from, joint planning.

A dilemma to be sure.

7

I am really not worried about how to handle it for my current circumstances; it’s more about how to handle all the what-ifs. Like if we both die in a car crash, who would the contingent beneficiaries be?

8

Just curious, does a trust need participation of an actual accredited lawyer at any point? Surely there are accounting rules about what can be spent and how in the provision for the trust, a charter or something - or is a trust simply “dump the money here and let X do what he wants with it”?

9

Heck if I know, but I have never heard of a trust that was drawn up without the participation of a lawyer. Even if that were the case, though, my brother is a lawyer licensed in the state in question. He doesn’t have any particular expertise in trusts or estate planning, though, and he didn’t draw up the trust himself - an estate planning lawyer did.

Anyway, poking around on the internet seems to reveal that the beneficiaries of a trust in New York State have the right to request copies of the trust documents, so as soon as I know what law firm drew them up, I will definitely do that. If nothing else, it will be useful information as I think about how to draw up my own will. (One potential contingent beneficiary is under 18, and both he and another contingent beneficiary are terribly irresponsible with money.) If anyone here knows otherwise, please feel free to chime in.

10

Hmmm, looks like you can even DIY a living trust using software. Maybe we will do that as a stopgap, or even to give us ideas about how to structure something we eventually do with a lawyer.

11

ETA: @md-2000 a couple posts ago

A trust is kinda like a corporation and there are many many kinds with many many different legal and tax treatments. State law governs, but there are some universal elements that are driven by federal tax law.

But trusts are very highly customizable, depending on what the goals are: charity, something to avoid probate, something to avoid tax, something to provide for a disabled offspring, provide for a potentially disabled future you, etc.

A non-lawyer would have very little success getting the basics even remotely right. And if the IRS doesn’t like the way your trust is set up, that can trigger very nasty tax consequences.

A good software app (if such exist) would be able to avoid the worst pitfalls. Can you judge if the software is good or not? Or is updated for the latest court & IRS rulings? Or is actually compliant with your state’s law versus just claiming it is?

Once the trust exists, the next step is funding it. Which may happen now, or only upon the death of somebody. Huge tax differences if that’s done wrong. If you’re going for post-death funding, it’ll only go right if the will is written with full knowledge of the trust and vice versa.

Once the trust is in operation, there’s not necessarily any lawyerly involvement. But the trustee(s) probably want a CPA or CFP to be involved to ensure the accounting and IRS stuff is going in accordance with the trust document’s requirements and with the IRS’s tax and informational return filing requirements.

Having an MBA, having been a small businessman, and doing my own taxes for decades before TurboTax and for decades since, I think I’m a pretty strong as a layman goes on accounting and taxation.

What I learned from my estate attorney late first wife about trusts quickly showed me it was a strange alien world about which I suspected little and knew exactly bupkiss.

As with wills, the acid test is when somebody dies or is incapacitated. By which time it’s comprehensively too late to fix any errors of law or oversights of planning.

IMO, leave this to the pro’s.

12

I am sure we will talk to a pro eventually, but they will ask us questions, and I want to be prepared for what those considerations actually are. Honestly the way Illinois handles intestate succession is pretty much what I would want anyway. And our finances are pretty straightforward: a house (which we hold as tenants in the entireties), a savings account, IRAs/401ks which would be distributed according to beneficiary designations anyway, that sort of thing. Software might be worth it even just to use for the durable powers of attorney and advance healthcare directives, and/or to come up with questions to ask an estate planning attorney.

13

Agree completely with getting smart by using software or books to learn what the questions are and to explore your answers before engaging with a pro. That’s doing your homework. My comments were mostly aimed at @md-2000 and the thread audience in general. You’re in the legal biz; you know very well just how much DIY doesn’t work in arcane areas of the law.

My late first wife and I had interlocking wills and trusts. As a childless couple, the real purpose of that planning was dealing with

  • We both get killed in a single accident.
  • In whichever order, one or both becomes physically or mentally disabled while the other lacks the stamina to manage that additional burden or is dead or disabled themselves.
  • Having paid professional management of all this in place before the need arose.
  • Once we were both dead, managing what promised to be a complicated distribution of non-trivial funds to a bunch of our respective extended family members spread around the country who mostly didn’t know each other and had no a priori reason to trust each other. Hence the paid professional executor who’s not a member of anyones’ “team”.

As my late wife’s physical health deteriorated, we spent a couple years at a place where (absent all our planning) she’d have been utterly screwed if I was hit by a bus or had a crippling stroke. Which didn’t happen, but we were ready, and had been for years. That was very comforting to her. Absent the planning I’d also have been screwed if I had had that putative stroke once she was too ragged to spare the energy to care for me or even oversee the management my care.

Becoming debilitated or dead is coming for each of us. Your life and health can go totally haywire any second of any day or any night. Pretending otherwise is not smart. Not that you would, but so many do. Build a plan and a support system while you can.