When planning for the future, most folks think a will is all they need. A will does a lot. A will can determine who gets what property, who will care for minor children, what kind of funeral arrangements you desire, and so much more. However, a will is not always the best document to handle all of your end-of-life planning needs. Especially if you are leaving behind significant assets, most estate planning attorneys will suggest establishing a trust. But who needs a trust?
A trust is a fiduciary arrangement that determines how your assets will be distributed outside of a probate court. For example, most wills still need to go through the probate process to prove their validity and distribute the assets. This means that assets will be brought under public scrutiny, legal proceedings will take place prior to the distribution of assets, and your heirs will likely need to pay estate taxes on any inherited assets. But with a trust, this process can take place outside of the court system.
Trusts can also be structured to be effective prior to the death of the grantor, or the person establishing the trust. Trusts can take effect on a specific predetermined date, upon the incapacitation of the grantor, or upon the grantor's death. Trusts can also be utilized to achieve various objectives, such as transferring property, minimizing estate taxes, preserving assets for minors until they reach a certain age, or providing one-time or long-term charitable benefits.
Despite the effectiveness of trusts, many are wary of establishing one or think their assets are not "worthy" of a trust. Our experienced estate planning attorney works with clients across NJ to plan for the future. Here is how we determine if a trust is appropriate for your estate plan.
Trusts offer a high level of specificity that wills and other estate planning strategies simply do not. Trusts enable you to specify in advance exactly how, when, and to whom your assets will be distributed. There are also many different special-use trusts that will meet all kinds of estate planning goals. You can establish a trust for a number of reasons, including charitable giving, tax reduction, care for special needs dependents, etc. Some of the most common trusts include:
Revocable Trust: A trust that can be revised, changed, or revoked by the grantor at any time throughout their lifetime, as long as they are medically capable.
Irrevocable Trust: A trust that cannot be changed or revoked at all after the signing of the agreement. Revocable trusts become irrevocable after the death of the trust owner.
Testamentary Trust: A trust that takes effect only after the death of the grantor.
Special Needs Trust: A trust designed to benefit a special needs dependent but does not interfere with the receipt of government benefits like Medicaid and Medicare.
Charitable Trust: A trust established to provide contributions to charitable causes. These trusts often provide tax benefits to the grantor.
There are different tax liabilities associated with the above trusts. An estate planning lawyer can help you determine the best plan for your estate. Whatever level of specificity you are looking for, a trust can provide the structure through which your specific desires can be legally protected.
The biggest drawback with relying solely on a will for all your estate planning needs is that a will can only go into effect after you die. Prior to your death, your loved ones will need to rely on a Power of Attorney or medical proxy document to make decisions on your behalf. While these documents do offer some legal and financial protections, they may not be as legally effective as a trust.
You can establish the terms of a trust to take effect if and when you become incapacitated. Especially if you are worried about a stroke, mental decline, or some other incapacitating medical event, a trust ensures that your assets are preserved and managed in accordance with your wishes while you are still alive. You can determine how your resources should be used while you are in the care of loved ones or health professionals.
When you are planning for the future of minors and special needs dependents, trusts can allow you to control their care even after you are gone. You can provide the funds to ensure their continued financial security while putting limits or requirements on how the money is spent. These trusts can be set up to go into effect while you are alive or after your death.
Trusts are extraordinarily flexible in the different ways they can be deployed. For example, when establishing a trust for a special needs dependent, you can appoint a trustee to assist in the management of funds to ensure your intentions for the trust are respected and to protect your loved one. For minor children, you can appoint a trustee to manage assets until they meet a certain age or milestone. This can prevent minors from irresponsibly squandering their inheritance and even protect them from creditors or lawsuits.
Trusts offer a more robust and specific estate plan than a will. The terms will be more detailed and specific and therefore need to be held to a higher level of legal scrutiny. Because of this, it is almost always necessary for the person setting up the trust to sit down with an attorney. For this reason, trusts can be more expensive and legally complex. However, these up-front costs frequently save your beneficiaries a significant amount of money in the end.
It can also be challenging for individuals unfamiliar with trusts to determine which type of trust is best suited to help them achieve their goals. A skilled estate planning attorney can work with you to determine what kind of trust is right for your situation and help you think through effective terms that align with your wishes. An attorney's job is to work in your best interests. They will be able to recommend an estate plan—with or without a trust—that best protects the assets and people you care about the most.
You do not need a significant amount of money or assets to establish a trust. A trust is another critical legal and financial tool that helps you plan for the future, protect your assets, ensure your wishes are fulfilled, and gain peace of mind.
Veitengruber Law is an experienced estate planning attorney in NJ. We work with clients to develop strategic estate plans that protect them both legally and financially. We have extensive experience helping clients establish trusts for various purposes. We approach estate planning with compassion and a deep understanding of New Jersey inheritance laws. Contact us today to discover how trusts can safeguard your interests.
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