Establishing a Trust is a cornerstone of savvy estate planning, allowing you to seamlessly transfer your assets to your chosen beneficiaries without the delays and expenses associated with probate court. A Trust is essentially a legal arrangement where you, the grantor, transfer the ownership of your assets into a Trust, managed by a trustee, for the benefit of your selected heirs. This process is not just efficient, but it also offers privacy and can be tailored to suit a variety of needs and asset types.
Understanding which Trust is the ideal fit for your estate plan, however, can be a nuanced decision. Each type of Trust serves a distinct purpose and choosing the right one can significantly impact the future of your estate and the well-being of your beneficiaries.
For personalized advice and meticulous management of your estate plan, reach out to a knowledgeable New Jersey trust attorney. Take action today and ensure that your estate is crafted precisely to your specifications. Contact The Matus Law Group at (732) 281 – 0060 to schedule a consultation, and help you navigate the path to a secure and prosperous future for you and your loved ones.
Revocable Trust
A Revocable Trust is the most common form of Trust. It can be given to any person. It is called “Revocable” because the creator can access the assets they placed into it while they are still living. They can also change the intended recipients at any point if they want.
Irrevocable Trust
An Irrevocable Trust is another standard form of Trust. It is “Irrevocable” because once you create it, you can no longer access anything you place in it or change who it is going to. It is set in stone, unlike a Revocable Trust.
Charitable Trust
A Charitable Trust is one that is going to a charity organization rather than an individual. Charitable Trusts also tend to be Irrevocable.
Special Needs Trust
A Special Needs Trust is one designed to benefit a loved one with special needs who may not be able to properly handle being given the assets directly or would not be properly served by probate. We’ve written a lot about Special Needs Trusts in the past – including how to provide even more than they do.
Spendthrift Trust
A Spendthrift Trust is a Trust where the intended recipient does not have direct access to use the assets as they wish. It’s normally intended for small children, but it could also be used for particularly financially irresponsible loved ones.
Qualified Domestic Trust
A Qualified Domestic Trust is intended to give a foreign citizen spouse of a United States citizen the same benefits that any other spouse would receive. It helps bypass some of the national laws of the probate court to treat loved ones with different citizenship equally.
| Trust Type | Description |
|---|---|
| Revocable Trust | Allows the creator to access and modify assets during their lifetime; beneficiaries can be changed at any point. |
| Irrevocable Trust | Creator cannot access or alter assets once placed in the trust; beneficiaries are set and cannot be changed. |
| Charitable Trust | Assets are designated for a charity organization; typically irrevocable. |
| Special Needs Trust | Designed to benefit individuals with special needs who may not manage assets directly; helps avoid probate issues. |
| Spendthrift Trust | Assets are not directly accessible by the recipient; often used for minors or financially irresponsible individuals. |
| Qualified Domestic Trust | Intended to provide benefits to a foreign citizen spouse of a US citizen, ensuring equality in estate distribution despite differing citizenships; helps navigate probate laws across nations. |
Avoiding Probate with a Revocable Living Trust
A revocable trust can accomplish the same things as a will does while allowing the surviving family members to avoid probate. This is because a New Jersey-based revocable trust is able to virtually hold almost any asset. When all of the assets are placed in a trust and have a trustee and beneficiaries listed, there is no need to rely on a will to determine the distribution of the assets.
After the grantor’s death, the trustee of a revocable living trust gains access to the assets immediately after the grantor’s death. The trustee does not have to wait for 10 days to go to the Surrogate Court in order to obtain access to the assets in the trust. This quick turnover allows the trustee to being paying off debts, and taxes, and distribute assets right away without waiting for anyone else.
Sometimes, the distribution of assets can be a one-time matter. The trustee can pay them out and then their task is over. In some cases, the trustee may need to keep the trust in place and manage it until beneficiaries reach a specific age, or until everyone has exhausted all the funds.
What are the Most Common Types of Trusts?
When planning for the future, understanding the most common types of trusts can be a cornerstone of effective estate management and legacy planning. Trusts come in two basic structures: revocable and irrevocable, with the primary difference being that revocable trusts can be modified after their creation, while irrevocable trusts usually cannot.
A revocable trust, also known as a living trust, can accomplish much of what a will does, but with a significant benefit—avoiding the probate process. Probate can be cumbersome and lacks privacy, whereas a revocable trust is typically private. You maintain the ability to make changes and are considered the owner of the assets for tax purposes. At death, revocable trusts can be designed to distribute assets directly to beneficiaries or to establish new irrevocable trusts for continued benefits.
Irrevocable trusts, conversely, provide a fixed structure where the assets are transferred out of your estate, potentially offering protection from creditors and reducing estate taxes. These trusts file their own tax returns and can be set up during your lifetime or through your will at the time of your death.
The variety of irrevocable trusts cater to different needs, such as preserving a family business, minimizing estate taxes, or providing for a charity. For example, Irrevocable Life Insurance Trusts (ILITs) can fund estate taxes to prevent the sale of a family business. Other trusts like Grantor Retained Annuity Trusts (GRATs) and Qualified Personal Residence Trusts (QPRTs) focus on transferring assets while minimizing taxes.
For those with charitable inclinations, Charitable Remainder Annuity Trusts (CRATs) can offer income to beneficiaries first, with the remainder going to charity. Special Needs Trusts are created to ensure a disabled beneficiary can receive government benefits without being disqualified by an inheritance. Domestic Asset Protection Trusts (DAPT) protect assets from creditors, and Generation-Skipping Trusts (GST) can help transfer wealth without incurring extra estate taxes.
Choosing the right trust depends on your individual circumstances and goals, and it’s essential to consult with legal and tax professionals to ensure the trust aligns with your estate planning objectives.
Get the Right Trust For You
At the Matus Law Group, we know a thing or two about Trusts. If you are ready to protect your assets, your family, or your business, we can help find the best Trust to meet your needs. To get started, contact the Matus Law Group today! We’re here to provide you with compassionate and effective counsel. We have unique solutions for unique families!
