An estate plan is a vital part of smart future financial planning. Most people know that an estate plan includes a last will and testament, but another important feature is a trust. A trust is a versatile tool that helps keep assets safe and are an important tool in estate planning.
Irrevocable & Revocable Trusts in NJ
What is a Trust?
A trust is a relationship involving two parties, the trustor and the trustee. The trustor gives the trustee the right to hold assets on behalf of a beneficiary or beneficiaries. Trusts can help avoid probate, minimize estate taxes, and reduce paperwork. By avoiding probate, beneficiaries usually gain access to assets more quickly than if assets are transferred using a will. A trust offers more options when it comes to managing your assets. Some of the benefits of creating a trust are:
- Control of where your assets go and how quickly beneficiaries can gain access to them
- Protection of your assets from your beneficiaries’ creditors
- Avoidance of the lengthy and complex probate process
- Saving on estate tax fees and court fees
Most Common Types Of Trusts
There are many different types of trusts, including the following:
- Testamentary Trust/Credit Shelter Trust
- Marital or “A” Trust
- Bypass or “B” Trust
- Irrevocable Life Insurance Trust
- Testamentary Trust
- Charitable Lead Trust
- Charitable Remainder Trust
- Generation-Skipping Trust
One of the biggest distinctions on trusts is if they are revocable or irrevocable.
What is a Revocable Trust?
A revocable trust is also sometimes known as a living trust and can be changed or terminated during the grantor’s lifetime. The grantor can name themselves trustee and retain control over the trust during their lifetime and make arrangements for a successor upon death. Revocable trusts are the most common as they are flexible and will help avoid delays and problems that can arise with probate. Revocable trusts do not always help the estate avoid estate taxes, however.
What is an Irrevocable Trust?
An irrevocable trust is one that cannot be altered once it has been created. Once it is created, you give up control of the assets contained within the trust. The terms in an irrevocable trust cannot be changed nor can it be dissolved once it has been executed. The biggest advantage of an irrevocable trust is that it can reduce the amount of estate taxes that beneficiaries have to pay. An irrevocable trust is the option to choose if your primary goal is to reduce the amount of estate taxes that will need to be paid.
Deciding who should be named trustee is another important part of creating a trust. The trustee should be someone who can put feelings aside to be able to deal with beneficiaries. Some people use family members, but this can create problems and accusations of favoritism. People often use corporate trustees or establish professional trustees for irrevocable trusts. A professional trustee can be a trust attorney or an investment firm or bank. This can remove any hostilities that may develop between family members; however, these professional trustees require an additional fee. A common compromise is to name multiple co-trustees that have to agree on any actions taken involving the trust. People have also named family friends or business partners as trustees.
New Jersey Trust & Estate Planning Attorneys
Having a skilled attorney can help you decide what type of trust is best for your particular situation. Our estate planning and administration attorneys can guide you through this complex process and help you make the best choice for your beneficiaries. With over 30 years of experience, Davison, Eastman, Muñoz, Paone, P.A. can offer expert guidance to help ensure your legacy is safe.