In a trust established during a lifetime or in a will and therefore created at death, one individual (the trustee) holds assets for the benefit of another individual (the beneficiary). A trust can be created by dividing money or property into shares or units. How these are split up often determines the type of trust that is created. Trusts are a standard tool used to manage assets before death.
Benefits of Trusts
- Trusts Avoid Probate
Estate planning can be complicated, with the probate process costing upwards of many thousands of dollars. Estates with modest assets may also be worth saving this probate expense (cost) by using trusts. Trusts are a way to avoid the probate process when an estate owner is no longer living. Without a will, when an individual dies, the intestate succession laws of their state handle their assets.
- Trusts May Offer Tax Benefits
As part of an estate distribution process, taxes are paid on estates left by deceased individuals. Trusts are often used to avoid taxation on assets or provide tax-advantaged income. A basic understanding of what the trust entails is the first step in making an informed decision regarding any potential benefits. If a large estate is left in trust, the trust’s beneficiaries may receive tax benefits for income and inheritance taxes.
In estate planning, most trusts can be used to help you preserve your privacy after death. When a person creates a trust, they appoint a trustee and a contingent trustee. The trust can be customized to best suit your needs, including dictating who has access to documents related to the trust (trustees).
- Preserve Assets in The Family
Some people want to maintain assets for their offspring but are afraid that they will not handle the management of the money wisely. Establishing a trust is one option so that the money can be managed according to the needs of the beneficiary but subject to the discretion of the trustee.
You can set up the trust for your needs today and amend it in the future. There are flexible ways to structure your money with trusts. For example, charitable trusts may be structured so that the donation is only provided if an individual meets certain predetermined stipulations, such as performing military service, and endowments may be restructured as a series of trusts for specific periods. Because of the flexibility of these transactions, it is essential to consult with a qualified attorney before taking any legal action.
Types Of Trusts
- Special Needs Trust
Special Needs Trusts are created for individuals with disabilities to provide income for their maintenance without affecting their eligibility for government benefits. The trust can provide for an individual with special needs but is not necessarily intended to replace government benefits. It ensures your beneficiary with special needs is catered fore when you are gone.
- Irrevocable Trust
An Irrevocable Trust is a legally binding trust that cannot be changed, revised, or revoked. The terms of this type of trust are established by the person creating the trust to have detailed guidance for how their money will be distributed among beneficiaries after their death.
Irrevocable Trusts can protect against fluctuations in the financial market, are less expensive than estate taxes, and are especially useful for people with large amounts of money. The trust creator chooses how their assets will be distributed, whether they want to leave it all to one beneficiary, split it among several, make distributions of the trust at certain ages or provide specific provisions to be enacted after their death.
- Revocable Trusts
Their creator can change or revoke at any time revocable trusts. We can create it to hold property and money and be managed and distributed to benefit one or more beneficiaries. These trusts are common during the accumulation and distribution phases of retirement planning and are also secretive.
The benefits of a revocable trust are numerous, including more significant control of assets by the grantor, flexibility regarding access and distribution a level of privacy regarding who will receive these assets during the settlor’s lifetime protection of assets from bankruptcy or legal actions taken against the grantor (judgements). When evaluating this type of trust, it is essential to discuss all the possible options with your attorney.
- Life Insurance Trusts
Life insurance trusts were created as an estate-planning method, but they also provide the owner with many opportunities to help loved ones and charities. These trusts can be complex or straightforward, and they can protect assets from both income and capital gains taxes.
How to Set Up a Trust
While creating a trust can be relatively straightforward, it is still best to get a professional’s assistance, such as an experienced lawyer with trust experience.
- Figure Out Why You Want the Trust. First, you need to figure out what you want to accomplish with the trust. Is it simply a planning tool, or do you want to control property? Also, you need to decide how the trust will be funded and who will manage it.
- Interview Prospective Lawyers.You need to interview several lawyers who advertise their trust experience and ask how they would structure your trust. Interview at least three or four, and then choose one that you feel comfortable with. You should not just choose the lawyer with the lowest price or highest praise. This is a critical decision because the lawyer will help control your assets after you pass away.
- Establish The Trust. As the grantor, you decide what assets you want to put into the trust. The grantor is also called the donor, or settlor. You need a lawyer’s help to set up the trust in your state. Be sure that the trust is in writing, dated and executed. If you have a will, you can name the trust as a beneficiary of your estate.
Contact a qualified estate planning attorney at Tarta Law to help you ensure that your loved ones are cared for, and your wishes are honored. We will ensure that your wishes are carried out and that your estate plan covers your family’s needs. Our clients appreciate our attention to detail and comprehensive approach to their legal issues.
We are glad to serve residents of Midland Park, Ridgewood, Clifton, Glen Rock, Wyckoff, and Franklin Lakes, HoHoKus, Allendale, Saddle River, Upper Saddle River, Paramus, Wayne, Mahwah, Pines Lake, Ramsey, Woodcliff Lake, in New Jersey among other municipalities. If you have questions or would like a consultation with one of our experienced estate planning attorneys, contact us today at 201-444-8448.