New York Trust Series · Part 6
When I Say "Trust," Which One Do I Mean?
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“My friend set up a trust, so I want one too.” “I bought a trust product back home.” “The bank says my account is a trust account.” The word “trust” in each of these sentences may mean something completely different. This article helps you get the terms straight, so you and your attorney are talking about the same thing.
When Most People Say “I Want a Trust,” What Do They Mean?
In New York, when an ordinary family says “we want a trust,” they usually mean a revocable living trust: you serve as your own trustee, use your property as usual during life, and a successor trustee takes over at your death or incapacity. The main goal is avoiding probate.
But if you want a trust so a nursing home won’t consume your house, you are really talking about an irrevocable Medicaid asset protection trust. These two trusts work in almost opposite ways:
| Revocable Living Trust | Medicaid Asset Protection Trust | |
|---|---|---|
| Can you change it at any time? | Yes | Generally no |
| Can you take back the principal? | Yes | No |
| Does Medicaid count the assets as yours? | Yes | Generally not, after five years |
| Main purpose | Avoid probate, incapacity management | Long-term care planning |
So the real question is not “should I have a trust,” but “which one?”
Four Questions to Identify the Trust You Mean
- Will I want to change it or take the property back? Yes → revocable. I can let go → possibly irrevocable.
- When does it start? Now → living trust. Only after death → testamentary trust.
- Who manages it? Me → usually a revocable living trust. My children or another person → possibly an irrevocable trust. A bank or trust company → an institutional trustee.
- What problem am I solving? Avoiding probate? Young children? Nursing home costs? Estate tax? A family member with special needs?
Things Called “Trusts” That Aren’t What You Think
1. “In Trust For” bank accounts (ITF or Totten trust)
An account titled “John Zhang ITF Mary Li” simply means “this account goes to Mary Li when I die.” It is not a trust in the usual sense: there is no trustee managing it and no distribution rules. New York law treats it as an account that transfers at death (EPTL §7-5.1 et seq.).
2. Attorney trust, escrow or IOLA accounts
Special accounts lawyers use to hold client money, such as a down payment on a home. They have nothing to do with estate planning.
3. Chinese “family trusts” and “trust wealth management products”
- In China, a “family trust” (家族信托) is typically administered by a licensed trust company as trustee, usually with a high minimum funding amount, and is governed by Chinese law;
- “Trust wealth management products” are investment products, not estate planning tools;
- A U.S. family trust can have you or a family member as trustee and is governed by U.S. and New York law. Same word, completely different rules.
4. “Trust fund”
The phrase “trust fund kid” just means family money was set aside for a child. Legally, it could be any kind of trust.
5. Real estate investment trusts (REITs)
An investment vehicle in which you buy shares of a real estate company. Unrelated to estate planning.
6. “Offshore” or “asset protection” trusts
Set up abroad or in certain states, usually to protect against creditors. New York does not recognize a trust that benefits you while shielding you from your own creditors (EPTL §7-3.1), and foreign trusts carry complex U.S. tax reporting requirements.
7. “Living will”
It sounds like “living trust,” but it is not a trust at all. It is a document about end-of-life medical wishes. In New York, it is usually prepared together with a health care proxy.
8. “Land trust”
A way of holding real estate used in some states. It is not commonly used in New York, and online advice about land trusts usually does not apply here.
How to Talk to Your Attorney
Instead of saying “I want an XYZ trust,” describe your goals and worries directly. For example:
- “When I die, I want my children to handle my co-op without going to court.”
- “I’m worried that if I go into a nursing home, my house will be spent down.”
- “My wife has a green card but isn’t a citizen, and our assets are about $8 million.”
- “My son has autism and receives SSI.”
- “I still own an apartment and savings in China.”
Your attorney can then recommend one trust or a combination, coordinated with your will, power of attorney and beneficiary designations.
The Bottom Line
The word “trust” covers many completely different tools. Define the problem first, then choose the tool. That is how you avoid a trust that doesn’t fit your needs.
Attorney’s perspective
In a consultation, I ask clients to describe their goals in their own words rather than naming a type of trust. For clients who know Chinese “family trusts” or trust investment products, I first make sure we mean the same thing, so the trust we build actually fits.
For advice about your own family’s situation, call +1 718-218-5805 or schedule a consultation. We meet clients in Flushing and Manhattan, in English or Chinese.
Related: Part 5: What Types of Trusts Are There? A Simple Map | Part 17: The 15 Most Common Trust Mistakes
This article is for general information only and is not legal advice. Reading it does not create an attorney-client relationship. For advice about your situation, please contact us.
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