How To Plan Your Estate


Even if you choose to have no estate plan, New York State will provide you with one. When someone passes away with no estate plan, the laws of intestacy determine how and to whom your assets are distributed. These law may not reflect your true desires for the distribution of your assets.

When someone passes away with no estate plan, an administration proceeding must be commenced in court. The administration process is similar to probate in cost and length. Also like probate, assets that pass according to the laws of intestacy are subject to a Medicaid estate recovery claim.


There are different forms of how we hold title to property, one of which is joint tenancy with the right of survivorship. The term “right of survivorship” simply means that when one joint owner passes away, the surviving joint owner acquires the entire interest in the property.

Since a joint owner’s interest in property passes to the surviving joint owner automatically by operation of law, a joint owner has no way of controlling how the property will pass upon his or her death in a will or trust.

Owning property as a joint tenant with the right of survivorship can be a useful estate planning tool, as this type of ownership avoids probate and Medicaid estate recovery claims. However, joint tenancy presents several issues that sometimes go overlooked. For example, a jointly held bank account is considered available to a Medicaid applicant in its entirety. Additionally, assets held jointly may be subject to claims by creditors of the joint owner.


Upon the death of the owner, some types of assets pass directly to those listed in a beneficiary designation. Examples of these types of assets include life insurance policies, annuities, individual retirement accounts, qualified retirement accounts, and pension plans.

The advantage of having named beneficiaries is that the asset avoids probate and Medicaid estate recovery claims. The disadvantage is that since the asset passes directly to the named beneficiaries and are not controlled by the terms of a will or trust, the proceeds may pass in a manner that was not intended in the event of a special needs situation or a beneficiary who predeceases you.



Simply giving assets away during one’s lifetime can be a valuable part of an estate plan. It is important, however, to understand the consequences of gifting away assets.

There is no actual limit on home much you may give during your lifetime. However, an individual who make a “taxable gift” during a calendar year is required to file a gift tax return reporting the gift. Taxable gifts are generally those gifts over the annual exclusion ($14,000.00 in 2014) to anyone other than a spouse or charity. Making taxable gifts may also act to reduce the amount an individual can pass to free from estate taxes upon death.

Further, one must be mindful that a gift of any amount may have adverse consequences with respect to Medicaid eligibility. Where Medicaid eligibility is a concern, it is imperative to discuss the effect of any gifting plan with an elder care attorney.



A Last Will and Testament is a legal document that sets forth how a person wants his or her estate to be distributed upon his or her death. Many people choose to plan their estates by creating a Will. Doing so gives you control over how your assets are to be distributed upon your death. In a Will, an individual can implement estate tax planning, special needs planning and planning for minor beneficiaries.

It is important to remember, however, that property owned in trust, jointly held property and assets with beneficiary designations are not part of your probate estate and therefore are not controlled by the terms of your Will.

Although creating a Will is an effective way to transfer assets upon death, there are some disadvantages. Probably the biggest disadvantage is the probate process and the time and costs associated with it. Since a Will guarantees that a person’s estate will go through the probate process, it may not be the best estate planning vehicle to use.



A trust is a legal arrangement by which one party (called a “Trustee”) holds legal title to property for the benefit of another person (called a “beneficiary”). The person who creates the trust is called the “Grantor,” “Creator,” “Donor,” or “Trustmaker.” The rules or instructions under which the Trustee operates are set out in the trust document itself. Simply put, a trust is a set of instructions telling the Trustee how to manage property that the trust owns for the benefit of the beneficiary.

Revocable Trusts (Revocable Living Trusts)

Revocable trusts are often referred to as “revocable living trusts.” With a revocable trust, the Grantor maintains complete control over the trust. The trust can be amended, revoked or terminated at any time. This means that you, as Grantor, can take back the funds you put in the trust or change the trust’s terms. Therefore, the Grantor is able to reap the benefits of the trust arrangement while maintaining the ability to change the trust at any time prior to death. Revocable trusts are generally used for the following purposes:

Asset management: The trust permits the Trustee to administer and invest the trust property for the benefit of one or more beneficiaries. The Grantor retains the right to make all decisions with respect to the management of trust assets. The Grantor may also appoint a Successor Trustee to manage the property in the event of the Grantor’s incapacity or inability to act.

Probate avoidance: At the death of the Grantor, trust property passes to whoever is named in the trust in the manner chosen by the Grantor. The trust does not come under the jurisdiction of the probate court and its distribution will not be held up by the probate process. However, the property of a revocable trust will be included in the Grantor’s estate for tax purposes.

Tax planning: Where the Grantor has a spouse, a well-drafted revocable trust can minimize the estate taxes due by taking full advantage of both spouse’s New York State and federal estate tax exemptions. This is done through the use of credit shelter trusts (see below). Any and all income generated by the assets held by a revocable trust is reported on the individual tax returns of the Grantor.

Irrevocable Trusts

An irrevocable trust, discussed in greater length here, cannot be changed or amended by the Grantor. Any property placed into the trust may only be distributed by the Trustee as provided for in the trust document itself. For instance, the Grantor may set up a trust under which he or she will receive income earned on the trust property, but that bars access to the trust principal. This type of irrevocable trust is a popular tool for Medicaid planning.

Testamentary Trusts

A testamentary trust is a trust created by a Will. Such a trust has no power or effect until the Will of the Grantor is probated. Although a testamentary trust will not avoid the need for probate and will become a public document as it is a part of the Will, it can be useful in accomplishing other estate planning goals. For instance, the testamentary trust can be used to reduce estate taxes on the death of a spouse or provide for the care of a disabled child.

Credit Shelter Trust

Through the use of a credit shelter trust (either as part of a Will or a revocable living trust) a married couple can take full advantage of each spouse’s applicable estate tax exemptions. As compared to situations where spouses simply leave everything to one another upon death, a properly drafted credit shelter trust would allow a married couple to pass double the amount through their estates free from federal and New York State estate taxes.

Supplemental Needs Trusts

The purpose of a supplemental needs trust is to enable the Grantor to provide for the continuing care of a disabled spouse, child, relative or friend. The beneficiary of a well-drafted supplemental needs trust will have access to the trust assets for purposes other than those provided by public benefits programs. As a result, the beneficiary will not lose eligibility for benefits such as Supplemental Security Income and Medicaid. A supplemental needs trust can be created by the Grantor during life or through the execution of a Will.

Irrevocable Life Insurance Trusts (ILIT)

An ILIT is a special type of irrevocable trust. It is specifically designed to be the owner and the beneficiary of life insurance policies. When the life insurance proceeds are paid into the trust upon the death of the Grantor, they are not included in taxable estate of the Grantor for estate tax purposes. For this estate tax-free status to be attained, however, all of the technical and procedural rules governing ILITs must be followed to the letter.

Grantor Retained Annuity Trust (GRAT)

A GRAT is an irrevocable trust funded with cash or other income producing assets. The GRAT provides that the Grantor receive income produced by trust assets for a specified period of time in the form of an annuity. Upon the completion of this specified period, provided the Grantor has outlived the term, the assets in the GRAT will pass to named beneficiaries and will no longer be part of the Grantor’s estate for estate tax purposes.

Qualified Personal Residence Trust (QPRT)

A QPRT is an irrevocable trust specifically designed to hold your ownership interest in your personal residence. Under the terms of a QPRT, the Grantor transfers title to his or her residence to the trust and retains the exclusive right to live in the residence for a specified term of years. If the Grantor survives the term, the Grantor will no longer have any interest in the residence and it will not be included in the Grantor’s estate for estate tax purposes.

IRA Trust

An IRA Trust is designed specifically to act as the beneficiary of your IRA. It is a revocable trust which becomes irrevocable upon your death. When the trust becomes the beneficiary of your IRA following your death, the required minimum distributions (and any additional withdrawals which your Trustee deems appropriate) pour into the trust and the terms of the trust will determine how and when the proceeds will be paid out to your beneficiaries.

Current law allows non-spouse beneficiaries of an IRA to “stretch-out” the taxable required minimum distributions over his or her actuarial lifetime. The purpose of the IRA Trust is to ensure this “stretch-out” of the required minimum distributions after your death and/or to enhance the protection of your beneficiary’s inheritance from poor money management, an overbearing spouse, divorce, creditors and in special needs situations.