Creating one or more Trusts is an estate planning strategy that can avoid probate and may potentially have important tax implications. When you create a Trust, you are appointing one party, known as a trustee, to hold and manage certain assets for the benefit of another person or persons whom you designate, called beneficiaries. In a written Trust Agreement, you set forth the terms and instruct the trustee how the assets in the Trust are to be handled.
The terms of Trusts are private, unlike wills, and are not open to public scrutiny.
Trusts may be formed for many different purposes and have many different names, which reflect their purpose. Examples include Special Needs Trusts, Life Insurance Trusts, Charitable Trusts, Generation Skipping Trusts, Personal Residence Trusts, and many others. A Trust will be categorized as a Living Trust, which is in effect while you are still alive, or a Testamentary Trust, which goes into effect upon your death. A Living Trust may be either revocable or irrevocable, whereas a Testamentary Trust is always irrevocable.
If your estate is a large one that will be subject to estate taxes, you might want to think about creating one or more Irrevocable Trusts. Irrevocable trusts remove the assets they hold from your estate, and can be used to bring the value of the estate below the threshold for federal estate taxes. Once created, an Irrevocable Trust can’t be altered, so you will no longer have any control over the trust’s assets, which may pose a disadvantage. An Irrevocable Trust doesn’t completely eliminate taxes; it does, however, create a taxable entity separate from your estate, which will usually be taxed at a lower rate. The assets in an Irrevocable Trust are also beyond the reach of creditors, so this type of Trust can be a means to protect your assets for your loved ones or for causes or charities you name as beneficiaries.
A Revocable Trust is a Living Trust in which you maintain full control of all assets as long as you’re alive; when you die, the trust becomes irrevocable. The greatest advantage of creating a Revocable Trust is that it will ensure that the assets it contains will continue to be managed and preserved of if you become disabled. The assets places in a Revocable Trust are not protected from creditors, and a Living Trust does not remove assets from your total estate, so it does not provide the tax benefits of an Irrevocable Trust. It does avoid probate, however.
Setting up a Trust is detailed and complex process. It is important to have a New Jersey estates and trusts attorney lawyer with substantial experience in trust creation to draft documents for you, one who will take the time to listen to you, get to know you, and develop an understanding of your goals for the trust you are establishing. Your attorney will need to make a detailed examination of the total assets of your estate to determine whether creation of one or more Trusts will be an effective estate planning strategy in your particular circumstances.
At KingBarnes we will let you know if creating one or more Trusts is an appropriate strategy for your estate, and if so the best type of Trust to meet your needs. If a Trust is right for your circumstances, we will draft it with detailed and precise instructions to your chosen trustee to ensure that your wishes are clearly understood and will be followed.
Choose the leading estate and trust law firm in Atlantic and Camp May Counties. KingBarnes has a proven track record of providing effective legal solutions to clients in the South Jersey region. With three convenient locations in Northfield, North Wildwood, and Cape May, our experienced attorneys are here to serve you. Whether you’re facing estate and trust litigation, need help with estate planning, or have commercial or real estate legal needs, KingBarnes is here to help. Contact us today to schedule a consultation and experience the difference of working with a trusted and experienced legal team.
