Expert Analysis Trusts and Estates Law


The uncertainty that has emerged with the 2010 federal estate tax repeal and the current state of the economy has reconfirmed the importance of estate planning to preserve family wealth from taxes and creditors. A comprehensive plan must extend beyond the circumstances of the immediate client. This requires planners to utilize wealth transfer strategies that preserve assets throughout future generations. Without properly protecting beneficiaries from estate taxes, as well as their potential creditors and current and/or future spouses, a family's wealth preservation efforts can be severely hindered.

Despite our ever expanding litigious society and the upward trend in divorce rates, many clients fail to incorporate protective measures in their planning. The primary failure is the underutilization of lifetime trusts as a means to pass wealth to future generations. When properly drafted, a lifetime trust can be considered to: (i) provide a high level of beneficial enjoyment that is flexible and accessible, (ii) shield assets from a beneficiary's creditors, equitable distribution in the event of a divorce and the elective share upon death, and (iii) effectively keep trust assets from a beneficiary's taxable estate.

This article discusses the benefits and key components of lifetime trusts in New York and options in the absence of lifetime trust planning. It concludes with a 'friendly' lifetime trust approach applying the concepts presented herein. For purposes of this article, a parent or grandparent is referred to as 'client,' and a child or grandchild is referred to as 'beneficiary.'

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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