NEW REVOCABLE TRUST RULES

New York has recently amended its trust laws to encourage people to consider the use of Revocable Trusts (as opposed to Irrevocable Trusts). The virtue of such a trust is that because it is revocable, a person creating such a trust can change his or her mind, void the trust, and then take back all of the property placed in the trust. While I don't know why someone would void the trust, a person can do so immediately and with no conditions.

People essentially use the revocable trust to avoid probate, the delays of probate and the costs of probate. There are many other very good and important reasons to use a revocable trust other than avoiding probate.

Now in order to create such a trust, the creator must be at least 18 years of age. Any kind of property must be placed into the trust. But note that any asset which has a title or registered ownership (like a deed) must be transferred to the trust by a deed or other writing (This is where a great number of people mess up; either they forget to transfer all the assets to the trust or the transfer is defective.).

The trust must be in writing and must either (i) be acknowledged New York by a notary public in the same manner that is true for the recording of a deed in New York or (ii) witnessed by at least two witnesses. The creator must have some understanding of the implications of using such a trust.

In addition, the trust must specifically say that it is revocable otherwise it is irrevocable. Amendments to the trust must be made with the same formality that was used when the trust was created.

It is my experience that more and more people are employing the revocable trust; some of the reasons is that trusts are less subject to a contest by an unhappy heir; also trusts are more readily accepted by mutual fund companies and brokerage houses; trusts are being used as the beneficiary of IRA and other retirement plan distributions so that the retirement account owner may keep control on the use of the assets after death and also achieve a stretch out payment schedule. Furthermore, if the creator owns real estate out of New York, probate in the state where the real estate is located will be avoided if the real estate is transferred to the trust.

Think about it.