A trust is one of the most flexible tools in New York estate planning — but it is also one of the most misunderstood. New Yorkers often hear that “a trust avoids taxes,” “a trust avoids probate,” and “a trust protects my home” as if these were all the same promise. In reality, different trusts do different jobs, and choosing the wrong one can cost a family the very protection they were trying to build. This page explains how trusts work under New York’s Estates, Powers & Trusts Law (EPTL) Article 7, how they fit into a complete plan, and how 2026 estate-tax figures shape the decision.
Morgan Legal Group serves clients across all of New York State — from New York City and Long Island to Westchester, the Hudson Valley, and Upstate. Wherever you live, the statutes below are the same, because trust law in New York is set at the state level. Attorney Russel Morgan, Esq. and our team design trusts that coordinate with the rest of your plan rather than sitting in a drawer disconnected from your assets.
What a Trust Actually Is Under New York Law
A trust is a legal arrangement in which one person (the grantor, also called the settlor) transfers assets to a trustee, who holds and manages them for the benefit of named beneficiaries. New York governs the creation, validity, and administration of trusts under EPTL Article 7. The key insight is that the trust — not you personally — becomes the owner of whatever you transfer into it. That single shift in ownership is what makes trusts powerful for avoiding probate, reducing estate tax, and protecting assets.
But ownership is only meaningful if you actually move assets into the trust. A trust that is signed but never funded — meaning no property is retitled into its name — does nothing. This is the most common and costly trust mistake we correct for New York families.
Revocable Living Trusts: Avoiding Probate, Not Taxes
A revocable living trust is one you create during your lifetime and keep full control over. You can amend it, add or remove assets, change beneficiaries, or revoke it entirely. Because you retain that control, the trust’s assets are still treated as yours for tax purposes.
What a revocable living trust does accomplish:
- Avoids probate. Assets titled in the trust pass to beneficiaries without a court process, which means privacy, speed, and lower administrative cost. This is the headline benefit for most New Yorkers.
- Plans for incapacity. If you become unable to manage your affairs, your successor trustee steps in immediately for trust assets — complementing your durable power of attorney.
- Keeps your affairs private. Unlike a will, a trust is not filed in court and does not become public.
What it does not do:
- It provides no estate-tax savings. Because you control the assets, they remain part of your taxable estate.
- It offers no asset protection from your own creditors or from Medicaid recovery while you are living.
A revocable living trust works best alongside a “pour-over” will that catches any asset you forgot to fund into the trust.
Irrevocable Trusts: Tax Reduction, Asset Protection & Medicaid
An irrevocable trust is the opposite trade-off. You give up control — you generally cannot amend or revoke it — and in exchange you gain protections a revocable trust cannot offer. Because you no longer own or control the assets, they can be removed from your taxable estate and shielded from many creditors.
New Yorkers use irrevocable trusts for three main goals:
- Estate-tax reduction. Assets properly transferred out of your estate are not counted toward the New York estate-tax threshold. For larger estates, this can mean the difference between owing six figures in tax and owing nothing.
- Asset protection. Properly structured, the trust shields assets from future creditors and lawsuits.
- Medicaid long-term-care planning. A Medicaid Asset Protection Trust (MAPT) can protect your home and savings from nursing-home costs — but only if it is funded well in advance, because New York applies a 5-year look-back to transfers into the trust. Assets moved into the trust within five years of applying for institutional Medicaid can trigger a penalty period. The lesson is simple: irrevocable Medicaid planning rewards families who plan early.
The cost of these benefits is loss of control, which is why irrevocable trusts must be drafted with great care and reviewed against your full financial picture.
Special Needs Trusts: Protecting Benefits
A Supplemental (Special) Needs Trust, authorized under EPTL 7-1.12, allows you to leave money for a loved one with a disability without disqualifying them from means-tested public benefits such as Medicaid and SSI. Money in the trust pays for supplemental comforts — therapies, education, travel, equipment — that government programs do not cover, while preserving the benefits that cover essential care. For families supporting a child or sibling with special needs, this trust is often the single most important document in the plan.
Trust Types at a Glance
| Trust Type | Avoids Probate? | Estate-Tax Savings? | Asset Protection? | NY Statute |
|---|---|---|---|---|
| Revocable Living Trust | Yes | No | No | EPTL Article 7 |
| Irrevocable Trust | Yes | Yes (if properly funded) | Yes | EPTL Article 7 |
| Medicaid Asset Protection Trust | Yes | Often yes | Yes (after 5-yr look-back) | EPTL Article 7 |
| Supplemental / Special Needs Trust | Yes | Varies | Yes (preserves benefits) | EPTL 7-1.12 |
How Trusts Fit New York’s 2026 Estate Tax
Trust planning cannot be separated from New York’s estate tax, which has a feature that traps the unwary. For deaths on or after January 1, 2026 through December 31, 2026, the basic exclusion amount is $7,350,000. Estates below that figure owe no New York estate tax.
The danger is the New York “cliff.” Once an estate exceeds 105% of the exclusion — $7,717,500 in 2026 — the exemption disappears entirely, and the estate is taxed from the first dollar, not just on the amount over the threshold. The result: an estate just over the cliff can owe hundreds of thousands of dollars more than one just under it. New York’s estate-tax rates are progressive, ranging from 3% to 16%.
Two more New York rules shape trust strategy:
- New York has no gift tax. Lifetime gifts are not separately taxed at the state level.
- The 3-year add-back. Gifts made within three years of death are pulled back into the taxable estate. This is why transfers into irrevocable trusts should be made deliberately and early, not as a deathbed maneuver.
For estates approaching the cliff, an irrevocable trust — combined with strategic lifetime gifting outside the 3-year window — can move assets below the threshold and preserve the exemption. We explain the numbers in detail in our New York estate-tax guide.
Trusts Are One Part of a Coordinated Plan
A trust is powerful, but it is not a complete estate plan on its own. A comprehensive New York plan coordinates four documents:
- A will (EPTL §3-2.1) — signed at the end before two attesting witnesses — to direct any assets outside the trust and name guardians for minor children. Dying without a will means New York’s intestacy rules under EPTL Article 4 decide who inherits, not you.
- A durable power of attorney (GOL §5-1513) — durable by default and using the 2021 statutory short form — so someone can manage finances if you cannot.
- A health care proxy (Public Health Law Article 29-C) to appoint an agent for medical decisions — a separate, distinct authority from the financial POA.
- One or more trusts under EPTL Article 7 to avoid probate, reduce tax, and protect assets.
When these documents are drafted together, they reinforce one another. When they are bought piecemeal, gaps appear. Start with our estate-planning overview or our statewide New York guide to see how the pieces fit.
Frequently Asked Questions
Does a revocable living trust save me estate taxes in New York?
No. Because you keep full control over a revocable living trust, its assets remain part of your taxable estate. A revocable trust’s main benefit is avoiding probate and planning for incapacity — not tax savings. To reduce New York estate tax, you generally need an irrevocable trust combined with careful gifting.
What is the New York estate-tax “cliff” in 2026?
For 2026 deaths, the basic exclusion is $7,350,000. If your estate exceeds 105% of that — $7,717,500 — you lose the entire exemption and are taxed from the first dollar at rates of 3% to 16%. Trust planning is often aimed at keeping an estate below this cliff.
Why does the Medicaid trust have a 5-year look-back?
New York applies a 5-year look-back to transfers into a Medicaid Asset Protection Trust. Assets moved into the trust within five years of applying for institutional Medicaid can create a penalty period of ineligibility. Because of this, irrevocable Medicaid planning works best when done years before care is needed.
Will a trust protect an inheritance for my disabled child?
Yes — a Supplemental (Special) Needs Trust under EPTL 7-1.12 lets you leave assets for a loved one with a disability without disqualifying them from Medicaid or SSI. The trust pays for supplemental needs while preserving eligibility for essential benefits.
Do I still need a will if I have a trust?
Yes. A “pour-over” will catches any asset you did not transfer into your trust and routes it there, names guardians for minor children, and serves as a backstop. Without a valid will, New York’s intestacy rules under EPTL Article 4 control those assets.
Speak With a New York Trusts Attorney
Choosing between a revocable trust, an irrevocable trust, a Medicaid trust, or a special needs trust depends on your assets, your family, and your goals — and on getting the funding and timing right. Attorney Russel Morgan, Esq. and Morgan Legal Group design and fund trusts for clients throughout New York State.
Schedule your confidential consultation to build a trust strategy that fits your 2026 plan.
Have a question about your estate?
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