Many people think that trusts are only for the extremely wealthy. At Mariano & Coiro, P.C., we have been helping people create estate plans for nearly 40 years.
We know that anyone who wants or needs to incorporate a trust into their estate planning can do so, even if they do not own many assets or have a complex estate.
You can create a trust for many reasons, providing for your chosen beneficiaries and setting the terms as you see fit. As with all estate planning tools, you need to understand when a trust is the right fit for your planning goals. There are both advantages and disadvantages to creating a trust in New Jersey.
Advantages of creating a trust
Many people choose trusts because the assets owned by the trust do not have to go through the probate process, although New Jersey is a relatively “probate friendly” State. This can save your beneficiaries time and money in the long run.
Another advantage of a trust is that it can provide for beneficiaries in very specific ways. A trust’s terms provide strict parameters for how and when assets are distributed. For example, a trust may be necessary to provide for minors (i.e., under the age of 18), who are not permitted by law to hold money or assets). Another example is a Special Needs Trust which can help provide for beneficiaries with disabilities, while preserving their access to crucial public assistance programs to which they may be entitled in the future.
In a trust, the terms can be very specific as to how the assets are to be used or not used. Examples may include:
- Ensuring that the assets are used for housing
- Ensuring that assets are used for education
- Protecting the assets from the reach of creditors
- Providing for a favorite charity
A trust can also be formed for children from another marriage. Your assets will be encompassed in a single trust so that these children cannot be disinherited by your surviving spouse.
Disadvantages of a trust
Some disadvantages of creating a trust are that:
- Inheritance tax on a trust can be very complex
- Beneficiaries may have to pay income tax on assets received
- The trust is a separate entity which must be managed and file annual tax returns
- Guardians for children cannot be named (although you can separately do this in your Will)
- Instructions on how to pay the remaining taxes and debts are not included
- Trusts are more difficult and costly to establish and administer than wills, although some trusts can be created within your will
Trusts are flexible and useful in many situations, but are not the right tool for all situations or for all people. A comprehensive estate plan includes a variety of documents that work together where necessary.
Enlist the help of a professional
Because creating a trust, transferring property into that trust, and understanding the tax situation can be complex, we recommend you get advice from an experienced attorney to help you with your estate planning. The attorneys at Mariano & Coiro, P.C., are here to help you with all of your estate planning needs, including a wide range of trust and related tools. Contact us through our website or call 732-860-7620 to schedule a FREE and CONFIDENTIAL consultation with our attorneys who are are knowledgeable and experienced in estate law and the forming of trusts.