Understanding How Trusts Work With an Estate Plan

You may have clear ideas about how your assets should be managed and distributed as part of an estate plan. While a will can be an important part of your plan, it can be more easily challenged in a New Jersey probate court. Trusts can provide a greater amount of privacy, control and protection when you want to pass on your property after death.

How to Create a Trust

When your estate planning litigation lawyer works with you to draft a trust, you’ll name a trustee, which is the person responsible for managing the assets in the trust. As the creator, you may set up a type of trust in which you have discretion over how the trustee manages the funds, or you may create more general instructions that direct the work of the trustee.

You could name beneficiaries of the trust who are entitled to receive either the underlying assets or the proceeds of the trust. Common beneficiaries include loved ones like children, a spouse or other family members. However, trusts may benefit charitable organizations as well as individuals.

Trusts can hold many different types of property, including real estate, bank accounts, investments and securities, life insurance proceeds, business assets and collectibles. For the trust to function as you intend, it must be funded, meaning that you must formally transfer assets to the trust.

Why and When to Use a Trust

Trusts provide a greater sense of privacy and direct access. You can pass on assets without the lengthy, costly and sometimes contested process of New Jersey probate court. Because of the higher level of control involved in a trust, you can direct a clear plan for the management of your assets in case of incapacity as well as death. You can also set guidelines that establish when and why your beneficiaries may receive proceeds or principal from the trust.

There are certain situations in which a trust can be a particularly important part of your estate plan. If you have minor children, you may want to set up a clear mechanism for how they’ll be supported after your death. A trust can allow you to do so and provide clear distributions for their upbringing, education and other expenses. Trusts can also be a good choice for older children who may still not yet be mature enough to manage a substantial amount of assets; they can allow such beneficiaries to receive distributions but inherit the principal later on.

If you have a loved one with special needs, trusts can also be an important tool. A special needs trust allows you to pass on assets to benefit a person with special needs without rendering them ineligible for key government benefits like Medicaid or housing support.

Different Types of Trusts

There are multiple different types of trusts that you can choose, and your New Jersey estate planning lawyer can advise you of the option that is best suited for your situation. Revocable trusts remain in your control throughout your life, and they can be changed or even dissolved at any time. They offer significant flexibility and are not set in stone until after your death. You may even name yourself as the trustee. Even with this flexibility, you can still enjoy the benefits like avoiding probate and providing greater security than a will.

Irrevocable trusts, on the other hand, cannot be changed or dissolved after their creation. While these are far less flexible, they can be used to protect assets from lawsuits and creditors. They can even help to spend down assets for Medicaid eligibility for long-term care. While the estate tax ceiling has been raised substantially, irrevocable trusts can also help those with substantial estates lower their tax burden.

If you’re looking to create a trust in New Jersey, consider partnering with a legal professional. An experienced estate planning litigation lawyer could help you achieve your goals for your assets. Contact The Knee Law Firm in Hackensack at 201-996-1200 or use our easy online form to request an initial consultation.