What Should I Know About Setting Up a Family Trust? A Complete Guide for Brooklyn Families

Setting up a family trust is one of the most important steps Brooklyn middle-income families can take to protect what they’ve built, preserve generational wealth, and provide peace of mind for loved ones. But despite its benefits, the process can seem complex and overwhelming.

At Alatsas Law Firm, we’ve helped hundreds of local families navigate this journey with clarity and confidence. In this guide, we break down everything you need to know about family trusts—what they are, their benefits and drawbacks, how to set one up, and practical insights tailored for New Yorkers. If you’re considering a family trust for the first time, or just want to ensure your estate plan is built on a solid foundation, this is your roadmap.

What Is a Family Trust?

A family trust—sometimes called a living trust—is a legal arrangement that holds and manages assets on behalf of your chosen beneficiaries (usually family members). Instead of assets passing through a will and the often lengthy probate process, they are managed by a trustee according to your detailed instructions.

Key characteristics:

• You (the “grantor”) transfer assets to the trust.

• The trust is managed by a “trustee”(this could be you or another trusted party).

• The trust’s beneficiaries—usually your spouse, children, or other relatives—receive the assets or income as the trust terms dictate.

This arrangement is designed to bypass probate, protect privacy, and allow you more control over how—and when—your assets are distributed.

Why does this matter?
In neighborhoods across Brooklyn, Queens, and Staten Island, families are increasingly concerned about skyrocketing long-term care costs, family disputes, and the public nature of probate courts. A family trust is a strategic way to ensure your wishes are honored privately and efficiently.

Why Do Brooklyn Families Set Up Family Trusts?

While every family’s motivations are personal, here are some of the most common reasons our clients at Alatsas Law Firm put a trust in place:

1. Avoiding Probate

Probate is the court-supervised process of distributing your assets after death. In New York, probate can be slow, expensive, and public. A trust allows your property to transfer directly to beneficiaries, skipping court entirely.

2. Protecting Vulnerable Family Members

If you have minor children, children with disabilities, or relatives who might struggle with a sudden windfall, a trust lets you specify:

• When and how they receive assets (e.g., after graduation)

• Structure protections to avoid asset loss due to creditors or divorce

3. Planning for Incapacity

Should you become incapacitated, a trust enables your trustee to manage your finances without the need for guardianship proceedings—ensuring seamless continuity.

4. Minimizing Estate Taxes

While most middle-income families in Brooklyn won’t hit the federal estate tax threshold, thoughtful trust planning can still reduce or eliminate New York estate taxes and preserve wealth across generations.

5. Addressing Family Complexity

Blended families, estranged relatives, and differing financial needs can easily trigger disputes. A trust provides clarity you can control, tailored to your unique family situation.

Types of Family Trusts: Which Is Right for You?

Family trusts aren’t one-size-fits-all. The right choice depends on your goals, asset levels, and concerns about taxes, control, and protection.

Revocable Living Trust

• Most common for families in Brooklyn

• You retain control and can change or revoke the trust at any time

• Popular for avoiding probate, ensuring privacy, and planning for incapacity

• Does not provide asset protection from creditors or lawsuits

Irrevocable Trust

• Once created, you lose control—you can’t change or revoke it

• Assets moved here are protected from creditors/nursing home costs

• Useful for Medicaid planning (protecting your home from long-term care spend-down)

• Can reduce estate taxes for high-net-worth families

Special Needs Trust

• Protects the benefits of a family member with disabilities

• Provides supplemental financial support without jeopardizing Medicaid or SSI

Other Variations

• Testamentary Trust: Created through a will and active only after death (does not avoid probate)

• Spendthrift Trust: Prevents beneficiaries from squandering assets or losing them to creditors

Comparison Table: Revocable vs. Irrevocable Family Trusts

Key Parties in a Family Trust Explained

A strong trust depends on having the right people in each role:

• Grantor (Settlor): The person(s) creating the trust—usually you and/or your spouse.

• Trustee: Person or institution who manages the assets according to your instructions. For revocable trusts, you can be your own trustee.

• Successor Trustee: Steps in if the primary trustee can’t serve.

• Beneficiaries: People or organizations who will benefit from the trust.

Pro tip: Choosing a reliable, organized trustee is one of the most important steps. At Alatsas Law Firm, we provide thorough guidance on selecting and preparing the right person for this responsibility.

Step-by-Step: How to Set Up a Family Trust

Setting up a trust in New York with help from an experienced estate planning attorney is straightforward—here’s how the process works:

1. Define Your Goals

• Who needs to be protected?

• What assets need to be included?

• What values and guidance do you want to pass along?

2. Choose the Right Trust Type

Review options with your attorney to match your family’s needs.

3. Draft the Trust Document

Your attorney crafts a legally binding trust document, tailored to your requirements and compliant with NY law.

4. Select Your Trustee and Successor Trustee

5. Fund the Trust

Transfer assets (real estate, bank accounts, investments) into the trust’s name—a step often missed in DIY setups.

6. Sign and Notarize the Trust

Proper execution is critical for the trust’s validity.

7. Update Beneficiaries and Title Documents

Coordinate with your financial institutions to ensure assets are properly retitled.

Avoid online templates! New York has unique laws—what works in another state may not here.

Tax Implications and State-Specific Considerations in New York

Estate and inheritance taxes:

• New York has its own estate tax, with an exemption threshold much lower than the federal level ($6.94 million as of 2025).

• Proper trust planning can reduce or eliminate state estate taxes.

Medicaid and Long-Term Care:

• Irrevocable trusts are often used for Medicaid planning, but must be set up at least five years before applying for benefits.

• Mistakes in setup can result in penalties or disqualification.

Capital Gains and Property Taxes:

• Transferring your primary residence to a trust may affect STAR exemptions and capital gains tax. Always consult a local attorney before making a move.

Mistakes to Avoid When Setting Up a Family Trust

Drawing on real-life experiences in Brooklyn and common pitfalls flagged by other top estate planning sources, here are mistakes to avoid:

1. Failing to Properly Fund the Trust:
   A trust with no assets retitled to it is useless. This is the #1 area of missed opportunity we see.

2. DIY Trusts Without Professional Guidance:
   Online forms rarely address specific New York requirements or family dynamics.

3. Unclear Instructions for Trustees:
   Ambiguity can lead to disputes or legal challenges.

4. Ignoring Medicaid Look-back Rules:
   Transfers into irrevocable trusts inside the 5-year window don’t protect assets.

5. Not Updating Estate Plans After Major Life Changes:
   Divorce, remarriage, or new grandchildren? Your trust should reflect your updated wishes.

Real-Life Examples: Family Trusts in Action

The Rodriguez Family (Brooklyn)
When Mr. Rodriguez suffered a sudden stroke, his family realized long-term care bills would wipe out their savings. Thanks to a Medicaid Asset Protection Trust set up several years earlier, they qualified for benefits—and kept their home safe for the next generation.

The Chen Family (Staten Island)
Worried about potential family in-fighting, Mrs. Chen used a revocable living trust to stipulate clear inheritance terms for each child (including instructions for a family business). The transition was smooth and confidential, with no probate court intervention.

These stories mirror concerns we hear daily at Alatsas Law Firm—and show the peace of mind that careful planning can deliver.

Frequently Asked Questions

Q: Can I change a family trust after it’s created?
A: Revocable trusts can be changed at any time. Irrevocable trusts generally cannot.

Q: Who should serve as trustee?
A: Many choose themselves as initial trustee, with a successor as backup. A reliable spouse, adult child, or even professional trustee may be appropriate depending on circumstances.

Q: What assets do I put in my trust?
A: Commonly: your home, financial accounts, investments, and business interests. Retirement accounts usually remain outside the trust, but beneficiaries are coordinated.

Q: Does a trust eliminate all taxes?
A: No. Trusts can minimize or defer taxes but do not eliminate them. Strategic planning is crucial, especially given local and state tax laws.

Conclusion: Building Your Family’s Legacy with Confidence

Setting up a family trust is about protecting more than just money—it’s about safeguarding your family’s future, values, and relationships. For Brooklyn’s middle-income families, the right trust can provide certainty in uncertain times, keep assets in the family, and spare your loved ones from unnecessary stress and expense.

If you’re ready to explore how a trust could work for your family, or if you need a local, culturally sensitive advisor, Alatsas Law Firm is here to help. Our decades of experience, community focus, and clear step-by-step approach can set you on the right path.

Secure your legacy. Schedule a personalized estate planning consultation today.

About Alatsas Law Firm

Located in Brooklyn, Alatsas Law Firm focuses on helping middle-income families create powerful estate plans that keep their families protected. Visit our website or call us for more resources and workshops on family trusts, Medicaid planning, and asset protection strategies tailored for you.