Legal Question in Wills and Trusts in New York

Re: asset protection

Both suggestions are valid, subject to possible claim for transfers in fraud of creditors. Presuming there are no pending claims against you or anticipated, which might expose you to this type of claim, I suggest either or both of the LLC and/or living trust. You can include your children in the LLC, making them additional partners, but some flexibility is lost, as they must have specified percentages of ownership, and any income must be annually allocated among the "partners" in accordance with their specified percentage of ownership, subject to your possibly being entitled to management fees, so you continue to get the bulk of the income. This might be good solely for the real estate, although certain tax benefits might be lost in the event the house was sold. I prefer an irrevocable living trust, naming your children as ultimate beneficiaries, but reserving to yourself and your spouse, discretionary rights to the income and principal, if you need it. In this case an "independent" trustee should be named along with you and your spouse, to be the one to exercise the discretion in your favor. This person can be another family member, close friend, professional advisor, etc. The benefit of this type of trust over using an LLC, is greater flexibility, from year to year, on how income and principal can be utilized for family members, allowing you to change beneficiaries from year to year, not locking you into fixed percentages of distributions, etc. Thus, greater use of the funds can be allocated, such as for college education, as each child needs it, and this can change from year to year. No transfer of IRA, 401(K) or other retirement plans should be made, as this would be treated as a current distribution, triggering immediate income tax consequences. Subject to spousal rights, the trust could be named as beneficiary of these accounts in the event of death. Life estates for the benefit of both spouses should be specified in the trust document, to meet legal requirements. Likewise, if the home is placed in the LLC, life estates for both spouses should be included in the new Deed. I do this type of work regularly, have been doing it for decades, so if you need more information or assistance contact mew directly.