Generally speaking, effective estate planning should entail much more than just making out a Last Will and Testament or establishing a basic Irrevocable or Revocable Trust.
While these are great tools, they are often touted as "one size fits all" solutions for protecting assets from the costs of long-term care. In reality, a standard will or trust alone often fails to provide your children with protection from predators, creditors, or unnecessary taxation.
Instead of a simple outright distribution, the inclusion of a Beneficiary Controlled Trust (BCT) in your estate plan may be the perfect solution. It allows your heirs to manage their inheritance while providing a fortress of protection around it.
What is a Beneficiary Controlled Trust?
A BCT is a specialized estate planning tool that gives a beneficiary control over their inheritance while offering protection from outside threats. Typically, a BCT allows a beneficiary to serve as their own trustee once they reach a certain age or milestone.
Once a child is a trustee of their own BCT, they can use the trust assets for their Health, Education, Maintenance, or Support (known as the HEMS standard). This allows them to use the inheritance for their ordinary and routine expenses according to their established lifestyle.
The Three Critical Protections of a BCT
1. Protection from Predators (Divorce)
Children who receive an outright inheritance often add their spouses as co-owners of those assets. If a marriage later ends in divorce, that inheritance can become part of an equitable distribution award. If properly drafted BCT provisions are in place, the inheritance remains separate property and is generally shielded from a divorcing spouse.
2. Protection from Creditors
A BCT can protect an inheritance from being seized by creditors. If a child has credit issues, works in a high-liability profession, or struggles to handle assets responsibly, the BCT keeps the money safe. In cases where a child cannot manage funds, a third party such as a bank or trust company can be appointed to control distributions.
3. Protection from the New York Estate Tax Cliff
While the federal estate tax threshold has risen significantly to $15 million in 2026, New York remains one of the few states with its own estate tax and a tax cliff. As of 2026, the New York estate tax threshold is $7,350,000. If an inheritance pushes your child's own estate over this limit, the state can tax the entire estate starting from the very first dollar. A BCT can keep the inheritance out of the child's taxable estate, potentially saving their family hundreds of thousands of dollars.
Why You Need to Plan in 2026
With the ongoing changes in New York law, including the anticipated but currently delayed 30-month look-back period for Community Medicaid, the window for proactive planning is more important than ever.
A BCT is a great tool that gives a beneficiary control over their inheritance while offering protection from life's uncertainties. Its use, both alone and in conjunction with other estate planning tools, should always be a consideration in your plan.
Protect your money, your family, and your legacy. Contact me today or call 845 292-9345 to schedule a consultation.