Continue reading and contact the knowledgeable Sussex County trust lawyers here at Laddey Clark & Ryan, LLP to learn more about these documents and how we can help you create one.
What is the Purpose of a Trust & Who Are the Parties Included in One?
The primary purpose of a trust is to provide a structured way to manage and transfer assets to beneficiaries, either during your lifetime or after your death. Trusts can help avoid probate, protect your privacy, minimize estate taxes, and ensure that your assets are distributed according to your specific wishes. They can also protect assets from creditors, ensure financial care for minor children, and provide for family members with special needs without compromising their eligibility for government assistance.
A trust typically involves three main parties:
- Grantor: The individual who creates the trust and transfers assets into it. The grantor also sets the terms and conditions under which the trust operates.
- Trustee: The person or institution responsible for managing the trust assets according to the terms set by the grantor. The trustee has a fiduciary duty to act in the best interests of the beneficiaries.
- Beneficiaries: The individuals or entities who will benefit from the trust, receiving income or assets as outlined by the trust’s terms. Beneficiaries can be family members, friends, or even charities.
What Are the Different Types of Trusts in New Jersey?
New Jersey offers a variety of trusts, each designed to meet different estate planning needs. Below are some of the most common types of trusts available:
- Revocable Living Trust: Allows the grantor to retain control over the assets and make changes to the trust during their lifetime. Upon death, the assets pass directly to the beneficiaries, avoiding probate.
- Irrevocable Trust: Once established, this trust cannot be altered or revoked. It removes assets from the grantor’s estate, potentially minimizing estate taxes and offering protection from creditors.
- Testamentary Trust: Created through a will and only takes effect upon the grantor’s death. It can help manage the distribution of assets to beneficiaries, often for those who are minors or have special needs.
- Special Needs Trust: Specifically designed for individuals with disabilities, allowing them to receive financial support without affecting their eligibility for government benefits like Medicaid or SSI.
- Charitable Trust: Allows a grantor to dedicate assets to charitable organizations, providing tax benefits and leaving a lasting philanthropic legacy.
- Spendthrift Trust: Protects beneficiaries from spending beyond their means or from creditors by controlling how and when the assets are distributed.
- Qualified Personal Residence Trust (QPRT): Helps reduce the taxable value of a person’s estate by transferring ownership of a residence to a trust while allowing the grantor to continue living there for a set period.
- Generation-Skipping Trust: Designed to pass wealth down to grandchildren or later generations, skipping the grantor’s children, and thereby potentially minimizing estate taxes.
Estate Lawyers Can Ensure Your Trust is Valid & Enforceable
For a trust to be valid and enforceable in New Jersey, it must meet several legal requirements, including:
- The grantor must be of sound mind and legal age (18 or older) when creating the trust.
- The grantor must clearly express their intention to create a trust and transfer assets into it.
- The trust must have clearly identifiable beneficiaries or a clear charitable purpose.
- The trust must be established for a legal and not an illegal purpose.
- A trust must be funded with assets (such as property, bank accounts, or investments) in order to be valid.
- Trusts must generally be in writing, particularly if they involve real property or are intended to take effect after death.
- The trust must name a trustee to manage the assets and carry out the terms of the trust.
By meeting these requirements, your trust will be enforceable in New Jersey and help ensure that your estate is managed and distributed according to your wishes.
Contact Our New Jersey Trust Lawyers
Don’t attempt to create a trust without a competent team of Sussex County estate planning lawyers. Our firm has extensive experience guiding clients through this process and can ensure your trust is valid, enforceable, and accurately reflects your wishes, thereby protecting your legacy for generations to come. If you have further questions or wish to get started, simply contact Laddey Clark & Ryan, LLP today.
