A living trust in New Jersey allows you to maintain use and control of your assets during your life and then passes them to beneficiaries after your death, all while providing protection from probate costs and state interference.
Living Trusts in New Jersey
A New Jersey living trust allows you as trust-maker to place ownership of your assets into a trust which will technically own them. The more assets you can transfer to the trust, the bigger benefit you will receive. Some assets, like retirement accounts and life insurance cannot be placed in a trust. You select a trustee who manages the trust for your benefit while you are alive. It is common to name yourself as trustee for optimum control. You then have a successor trustee named to step in after your death and continue managing assets and distribute them to your beneficiaries according to your written instructions. Your revocable living trust (sometimes called an inter vivos trust) can be changed, altered, or eliminated by you at any time during your life. An irrevocable living trust cannot be changed once it is created.
Creating a living trust allows you to avoid probate. Probate is the court procedure that approves a will before it can be put into motion. Probate can take many months (the assets in the estate can be frozen by the state of New Jersey for up to 18 months if it is valued at over $675,000) and incurs the costs of an executor and attorney as well as court fees. New Jersey has not adopted the Uniform Probate Code, so its procedures are not streamlined. New Jersey also does not have a simplified probate procedure for small estates as most states do, so any estate involving a will must go through a full probate process. If you place your assets in a trust, they are not held up by the probate process and can be distributed immediately upon your death if that is what you wish. A trust also distributes property you own in other states, avoiding probate in those states as well.
Do I Need a Living Trust in New Jersey?
If you choose to create a living trust New Jersey, you maintain control over your assets during life and after death. During your life, your assets are technically owned by the trust, but you continue to use them as you normally would. You can live in your home, spend money, manage investments, and give gifts. After your death, the successor trustee protects and manages your assets and then distributes them to the beneficiaries you have selected at the dates you choose. Some people choose specific birthdays for distribution to ensure beneficiaries are mature enough. If you pass assets through a will, they are all distributed en masse once probate concludes.
A trust offers a veil of privacy not available in other types of estate planning vehicles. The trust never becomes public record or requires court approval. Your assets, beneficiaries, and distribution instructions remain private. A will must become public record when it is probated. A trust is also more secure than a will because it is more difficult to contest.
While a living trust does not technically shield your assets from creditors, in practice, it can help avoid them. While creditors have the right to attach assets in a living trust, they may not be able to find them and if the assets are distributed quickly after your death, locating them may be more work than it is worth.
Your revocable living trust protects you should you become mentally incapacitated. All of your assets are already controlled, owned, and managed by the trust and a conservatorship proceeding is likely unnecessary. While a durable power of attorney can be rejected or challenged, a trust cannot be. Your financial life is protected by the trust.
Living Trusts and Estate Taxes in New Jersey
Living trusts do not protect you from estate taxes. New Jersey applies an inheritance and estate tax. Estates larger than $675 are taxed. Inheritance tax is not applied when the heir is a spouse, child, grandchild, parent, grandparent or stepchild. There is a $25,000 exemption for gifts to sibling and spouses of a deceased child. A federal estate tax is applied to estates that are above $5 million. Specially crafted trusts called QTIP, marital, or AB trusts do allow you to bypass estate tax by passing assets from a deceased spouse directly to a surviving spouse. Living trusts do not provide protection from Medicaid spend down laws.
How to Create a Living Trust in New Jersey
To create a living trust in New Jersey, the trust document is signed by the trust-maker in front of a notary public and then ownership of assets must be transferred into the name of the trust to make it effective. A living trust provides confidence that your assets will be managed and distributed exactly as you wish. A trust can be an effective estate planning option.
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