For many people, a will is sufficient for their estate planning needs. A simple estate with few assets and limited beneficiaries probably does not need a more elaborate plan as long as the benefactor makes provisions for medical and financial powers of attorney. However, you may be wondering if a will is enough for your estate.
There are some circumstances for which a living trust may be a positive addition to your estate plan. To know whether your situation requires a trust, it may be helpful to have a clearer understanding of what trusts are and the benefits they provide.
The finer points of a living trust
When you create a living trust, you allow the trust to retain ownership of any assets you fund to it. You do this by changing the titles on these assets so that the trust is the owner instead of you. This has several benefits, including the following:
- You can create a way for your heirs to seamlessly take over management of your properties or other assets if you should become incapacitated.
- Since the assets funded to the trust do not legally belong to your estate, they are not part of the probate process.
- A trust can also hold property from multiple states, allowing your heirs to avoid probate in those states in addition to New Jersey.
- Trust are private documents, unlike wills that become public during probate.
Some important points to understand about a living trust include the following:
- Living trusts are also known as revocable trusts because you can add, remove or change the assets in the trust as long as you have the physical and mental capacity to do so.
- As the creator of the trust, the law refers to you as the grantor.
- You may also be the trustee, which means you have authority to manage any assets funded to the trust.
- Your trust should include a successor trustee who takes over trustee duties if you die or become unable to manage the trust.
A revocable living trust won't protect you from federal estate taxes, if your estate qualifies. The revocable quality of the trust means you still have control of the assets, and the IRS considers them taxable. However, there are other options you may explore that could help you reduce your tax burden or create a more complete estate plan. An attorney with experience in New Jersey estate planning laws can be of great assistance.