Reasons to Consider Adding a Trust to Your Estate Plan
It’s estimated that those born between 1944 and 1964 will transfer nearly $30 trillion in wealth to their children and grandchildren. While there are many ways to transfer assets to beneficiaries, it may be a good idea to consider using a trust to facilitate your estate plan.
Trusts Take Effect Immediately
Unlike a will that doesn’t take effect until after you pass away, a trust will take effect the moment that it is executed and funded. This means that your trustee will be available to manage your affairs in the event that you become incapacitated. Ultimately, there is less of a chance that you’ll lose your home because the mortgage isn’t paid or that the court will appoint a guardian who you don’t trust.
It may be a good idea to appoint successor trustees to maximize the odds that someone is able and willing to oversee it if you are unable to do so. Anyone over the age of 18 who is of sound mind can typically serve in this position.
Trusts Aren’t Matters of Public Record
A will is a matter of public record, which means that almost anyone is free to read it after the document is submitted to probate court. However, a trust is not made public, which means that no one will ever know if one child received a larger inheritance than the other or how much your estate was worth at the time of your death.
Having a veil of secrecy surrounding your estate plan may minimize the risk of conflicts between family members. It may also prevent friends, family members, or others from going after a beneficiary hoping to siphon off a portion of that person’s newfound wealth.
Trusts Help Shield Assets from Creditors
Assets that are held by an irrevocable trust are considered to be located outside of your estate. This means that creditors are generally not entitled to make claims against them after your passing. It may also help to shield assets from being seized in a divorce or in other proceedings.
Assets that are held by a revocable trust are available to creditors as you have not given up dominion and control over the assets.
However, an exception may be made in the event that it can be shown that the trust was created in bad faith. An estate planning lawyer may be able to review an existing trust to determine if it may be vulnerable to creditor claims. An attorney may also be able to help create new documents that are structured in accordance with state law.
It should also be noted that holding assets in certain types of trusts may reduce the size of your estate for tax purposes. This may enable beneficiaries to keep more of their inheritances as opposed to sending it to state or federal tax authorities.
Assets Can Be Distributed on Your Schedule
A trust document can be in effect for as long as you want or need it to. Therefore, you have an extra layer of control over when a beneficiary actually receives money, a home, or other items. For example, you can stipulate that your child receives half of an inheritance upon your death and the other half after turning 35. You could also stipulate that distributions are to be made after hitting key milestones such as graduating from college or completing a drug rehab program.
You can also place conditions as to how assets are used. For instance, you could state that a financial windfall is only to be used to buy a home, pay for college, or to start a business. This level of control minimizes the risk that beneficiaries squander the wealth generated by your hard work. An estate planning lawyer may be able to help you craft a trust so that it accounts for as many variables as possible.
If you are looking for help determining if a trust should be added to your New Jersey estate plan, contact The Knee Law Firm in Hackensack today. You can do so by calling 201-996-1200 or by submitting our website contact form.