Oct 14, 2022 Assignment of Tangible Personal Property to a Revocable Trust
Deciding how and to whom your financial assets and property will be distributed at the end of your life is a challenging proposition. The process requires a person to consider their relationships, their obligations, the character and personal responsibilities of various beneficiaries, the nature of the property, and other assets being passed on.
In New York, consulting with an experienced trust and estate attorney is an essential step anyone thinking about these issues should take very early in the process—without delay. It’s important that one understands the difference between creating a trust and writing a will. Experienced trust and estate attorneys are extremely knowledgeable about wills and trusts and how each of them function.
To ensure someone makes the most informed decision about the best instrument to use in planning how their own estate will be set up, they should understand how wills and trusts work, how they differ from one another, and what advantages and disadvantages each instrument offers to both the settlor/testator(rix) and the beneficiaries.
In this blog post, we’ll focus on how a revocable trust can serve as a tool to transfer tangible personal property or other assets to the next generation or to other parties you wish to endow.
To find out more about assignment of tangible personal property to a trust, contact the experienced trusts and estate lawyers at Ely J. Rosenzveig & Associates today.
Advantages of Using a Revocable Trust to Transfer Tangible Property
When deciding how to distribute tangible personal property in an estate plan, problems arise that are more efficiently solved through the use of a revocable trust rather than a will.
Taxes: The assets in a decedent’s estate are subject to both federal and New York State estate taxes. If the articles of personal property in the estate are of substantial value, they may cumulatively exceed the level of the respective estate and gift tax exemption levels.
When financial assets or personal property are transferred to a revocable trust, they are still deemed to be owned by the decedent, and while these assets may not become part of the probate estate, they are taken into account for estate tax purposes. It is important to note that there are certain types of trusts that can be used to reduce or eliminate estate tax liability, however that discussion is a larger one, beyond the purview of this article.
Privacy: Many individuals and families place a high value on privacy. Because probating an estate is a public proceeding, all the documents filed with the New York Surrogate’s Court are publicly available, including descriptions of items of value and the identity of the person receiving them. Revocable trusts are managed privately by a trustee named by the trust settlor or grantor, whose integrity and discretion is relied upon by all parties.
Practicality: A will must be filed in probate court and the executor of the will has the responsibility to distribute the probate estate’s assets as directed in the decedent’s last will and testament. When estate assets include tangible property such as jewelry, art, fine wine collections, or valuable silver or other rare or antique objects, unless the testator included a list identifying to whom each item was to be given, the estate executor has to deal with the issue of distributing these items or their value, if sold, to the named beneficiaries, pursuant to the terms of the decedent’s last will and testament
Since the nature and value of objects like wine and jewelry are so different, the Will’s stipulations with respect to share distributions to named beneficiaries may require the sale of the property and the distribution of the proceeds to the heirs in line with the Will’s directives. This process can be very time consuming and expensive.
When items of tangible personal property are assigned to a revocable trust, they are transferred into the trustee’s possession and control during the settlor’s lifetime. Proper arrangements for their safe storage and proper conservation can be made immediately.
Special Considerations for Particular Property
Guns: Transferring certain personal property is especially complicated under New York law. For example, a large or expensive collection of firearms cannot simply be transferred to a beneficiary as one would leave someone a diamond ring.
New York State law prohibits any executor of a will to transfer firearms without the explicit approval of the Surrogate’s Court judge. Nor can the trustee of a standard revocable trust receive possession of firearms unless they pass a full background check. The increasingly common solution to this problem is the use of a “gun trust.”
Gun trusts are a special species of trust recognized by state and federal governments that are treated like a corporation in law. The regulations require registration and reporting of the firearms’ serial numbers and description, but the trust can hold the firearms for the use and benefit of family members or even for public exhibition.
Pets: Pets that survive their owners are often subject to uncertain futures. Often, their new residence is left to family or friends to determine, and, oftentimes the financial responsibility involved leads to their abandonment or euthanasia.
New York enacted a law to provide for valid trusts to be created to manage assets intended to be used for the benefit of a decedent’s surviving pets.
N.Y. Est. Powers & Trusts Law § 7-8.1 declares trusts for pets to be valid and authorizes the principal held or the income generated by pet trusts to be used exclusively for the care of the designated pet. The trust terminates upon the death of the pet or pets for whose care the trust was created.
The settlor can name a trustee to carry out the financial responsibility for pet, and any funds remaining in the trust when the covered pet or pets die is then distributed to the residual beneficiary named in the trust. If there is no residual beneficiary identified, then the remaining funds get transferred into the decedent’s estate.
Another special feature of a New York pet trust is a limitation on the amount of assets funding the trust. If the funds held by the pet trust so far exceed what is reasonably necessary for the care of the pet(s), then the surplus funds must be transferred immediately to the residual beneficiary, if there is one. If there is none, then the surplus funds go into the decedent’s estate.