Planning how your assets will be handled after your passing is an important step in protecting what you have built. Wills and living trusts are two common tools that can help you manage your estate and provide for your children. Each option has its own benefits, and understanding how they work can help in making the right decision. Choosing the right estate planning tool depends on factors such as the size of the estate, the level of control you want over asset distribution, and any specific needs your beneficiaries may have.
In reality, you can have both a will and a revocable living trust in New Jersey, as both ensure different things for you, depending on your situation. It’s crucial to seek professional legal guidance to understand the different tools available, and the benefits and drawbacks of including them into your plan, such as the advantages and disadvantages of a revocable trust.
If you need advice on which legal vehicle suits your situation, consulting an experienced estate planning attorney can be beneficial. At The Matus Law Group, our New Jersey estate planning attorney can offer professional guidance tailored to your specific circumstances, helping you plan with confidence. We can assist you in making informed decisions that protect your legacy and provide for your loved ones according to your wishes. Contact us today at (732) 785-4453 to schedule a consultation.
What is a Trust?
A trust is a fiduciary agreement where a property is going to be transferred to a trustee for someone else’s benefit. A grantor is a person who creates and funds the trust. This person usually writes a trust document that transfers their properties to another person called the trustee. The trustee will be responsible for administering the trust, and the person for whom the trust is created is called the beneficiary.
Under New Jersey Law, the Uniform Trust Code controls the creation, operation, and termination of the trust. The grantor has the freedom to write the trust in the way they want except that it is not allowed to have a term that is illegal or against public policy. Often, New Jersey case law and the uniform trust code must be examined if the trust fails to address an issue.
In order for a trust to be enforceable, the grantor must have the legal capacity to create the trust. This means that the grantor must be of sound mind, memory, and legal age when they create the trust. If the grantor is found to lack the legal capacity at the time of the trust’s creation, the trust may be void or voidable.
What is the Difference Between a Living Trust and a Trust?
In understanding estate planning, it’s important to clarify the terms often used interchangeably, such as “trust” and “living trust.” Essentially, there is no fundamental difference between these two as “trust” is a broad term that includes various types of trusts, including living trusts.
A trust is a legal setup where a trustee manages assets for the benefit of certain beneficiaries. This arrangement allows for the structured management or distribution of assets, tailored to the preferences of the person who sets up the trust (the grantor).
A living trust is specifically established during the grantor’s lifetime, hence the term “living.” The main goal of a living trust is to handle the grantor’s assets while they are alive and to facilitate the transfer of these assets to the beneficiaries after the grantor’s death, usually avoiding the probate process.
Testamentary and Living Trusts: What You Need to Know
A testamentary trust is a type of trust that is created as part of a will and comes into effect only after the grantor has passed away. This arrangement is designed to ensure that the grantor’s wishes regarding the management and distribution of their assets are carried out according to the instructions set forth in the will. With a testamentary trust, detailed plans can be made for how assets are to be handled once the grantor is no longer alive. This allows for a clear process of managing funds and property for the benefit of designated heirs or beneficiaries.
In contrast, a living trust is established and funded while the grantor is still alive, allowing for ongoing oversight and management of assets during the grantor’s lifetime. While both types of trusts offer benefits, a testamentary trust is particularly valuable for those who wish to leave specific guidance for their estate. It provides a structured way to handle asset distribution and can be tailored to meet various needs after the grantor’s death, ensuring that the intended plans are followed precisely when it matters most.
Living trusts can be either revocable or irrevocable. A revocable living trust allows the grantor to retain control over their assets while they are alive. Assets are transferred into the trust, and the grantor can modify or revoke the trust as long as they are capable. Upon the grantor’s death or incapacity, a designated successor trustee can take over management of the trust without requiring court involvement. This process allows for a more streamlined transfer of assets while avoiding probate proceedings.
An irrevocable living trust, on the other hand, cannot be altered once it is established. Once assets are transferred into the trust, the grantor relinquishes control, and changes generally require consent from beneficiaries or court approval. This type of trust may offer certain tax benefits and creditor protections since the assets are no longer considered part of the grantor’s estate.
A revocable living trust can be structured to accommodate specific needs. Revocable living trusts can establish many things as far as how your assets are managed and disbursed. A living trust in New Jersey enables you to:
- Establish timed disbursements of your estate to beneficiaries
- Avoid probate costs
- Decrease estate taxes
- Reduce creditor exposure
- Allow for lifelong access for special needs dependents
- Manage business or personal assets if you become incapacitated
Creating a trust that aligns with individual goals requires careful planning. A New Jersey estate planning attorney can assist in drafting a trust that reflects the grantor’s intentions while addressing legal and financial considerations.
Pros and Cons of a Living Trust
A living trust is an estate planning tool that allows individuals to manage and distribute their assets during their lifetime and after their passing. Unlike a last will and testament, a living trust takes effect as soon as it is created and notarized. This allows assets to be transferred into the trust’s name, offering potential benefits such as avoiding probate and maintaining privacy.
One of the primary advantages of a living trust is that it can help beneficiaries receive assets more quickly, as it does not have to go through the probate process. This can be particularly beneficial for those who have dependents or heirs who need financial support without delay. Additionally, a living trust may offer protection for beneficiaries with disabilities, helping them retain access to government benefits. In certain situations, it can also provide some level of creditor protection for beneficiaries.
While a living trust can be an effective estate planning tool, there are important considerations to keep in mind before establishing one. Creating a living trust is generally more involved than drafting a will and often comes with higher upfront legal costs. These costs may be offset by the potential savings from avoiding probate, but the overall financial impact will depend on the size and nature of the estate.
A living trust also requires ongoing maintenance. Any newly acquired property must be titled under the trust’s name; otherwise, it will not be included in the trust and will be subject to probate upon the owner’s passing. This step can be overlooked, especially when individuals acquire new properties over time. If assets are not properly transferred, they may be distributed according to state intestacy laws or as directed by a pour-over will.
It is also important to recognize that a living trust does not always guarantee the complete avoidance of probate. If certain assets are not included in the trust, those assets will still go through the probate process. This can happen when individuals acquire new property and fail to update the trust accordingly.
Although a living trust can provide advantages, it may not be the right choice for everyone. Weighing the benefits against the costs and responsibilities is essential when deciding whether to include a living trust in an estate plan. Consulting a New Jersey estate planning attorney at The Matus Law Group can help you determine whether a living trust aligns with your specific needs and goals.
| Aspect | Living Trust | Will |
|---|---|---|
| Implementation | Goes into effect upon creation | Goes into effect upon death of the individual |
| Control | Under the control of the grantor | Only becomes effective upon death |
| Creation and Management | May be more labor-intensive and costly to create | Typically simpler and less costly to create |
| Probate Process | Avoids the probate process | Subject to the probate process |
| Access to Assets | Beneficiaries have immediate access to assets | Access to assets may be delayed due to probate |
| Conflict Resolution | Trust terms supersede will in case of conflict | Will dictates asset distribution despite trust existence |
What is a Will?
A will is a widely known estate planning document that allows individuals to specify how their assets will be distributed and who will be responsible for carrying out their wishes after they pass away. It provides clear instructions on the handling of personal property, payment of debts and taxes, and the appointment of a guardian for minor children if necessary. A will also names an executor, the person who will manage the estate, oversee the probate process, and ensure that all legal and financial obligations are addressed.
This document does not take effect until death and must go through the probate process, where a judge reviews its validity and oversees the distribution of assets according to its terms. Through this process, the court confirms that the instructions outlined in the will are properly followed. While a will plays an essential role in estate planning, probate can take time and may involve legal fees and administrative expenses.
Pros of a Will:
- Allows you to name guardians for children
- Names property managers for property given to children
- Straightforward to write
- Permits you to specify funeral and burial arrangements
Cons of a Will:
- Must go through the probate process
- Entered into public record
- Only includes property in your name when you die, not property in a joint tenancy or trust
Deciding whether a will is the right estate planning tool depends on individual circumstances, financial goals, and family dynamics. A New Jersey estate planning attorney at The Matus Law Group attorney can review available options, explain how different estate planning documents function, and help determine which approach aligns with a person’s needs and objectives.
Living Trusts vs. Wills: Weighing the Pros and Cons
New Jersey wills and revocable living trusts serve important roles in estate planning, but they function differently and offer distinct advantages. A will becomes effective only after death, directing how assets should be distributed and allowing for the appointment of guardians for minor children. A revocable living trust, on the other hand, takes effect as soon as it is created and remains under the control of the grantor during their lifetime. It continues to govern asset distribution if the grantor becomes incapacitated or passes away
A living trust requires more effort to establish and maintain and may involve additional costs. However, it allows assets to be transferred to beneficiaries without going through probate, which can save time and expenses. A will, by contrast, must go through the probate process, which may delay asset distribution. If there is a conflict between a will and a trust, the trust generally takes precedence, and probate courts do not have authority over assets placed in the trust.
Choosing between a will and a living trust depends on your and your family’s specific needs. A person with grown children may prioritize asset distribution efficiency, while someone with a young adult child with disabilities may focus on long-term financial management and guardianship options. Your estate planning efforts can impact your children and other beneficiaries for the rest of their lives, so it’s important to cover all of your bases and meet all legal requirements.
Many estate planning attorneys recommend having both a will and a trust to address different aspects of asset distribution and management. Each document serves a unique purpose, and having both in place can provide a more complete approach to estate planning. A will allows for the designation of beneficiaries and the appointment of an executor, while a trust can help manage assets during a person’s lifetime and after their passing.
Consulting with a New Jersey estate planning attorney can help clarify how these documents work together and what may be most appropriate for a specific situation. At The Matus Law Group, our team can provide guidance on wills and trusts to help individuals and families create an estate plan that aligns with their goals. For more information or to schedule a consultation, call (732) 785-4453.
