Many of us accumulate assets over the course of our lives – assets such as a home, a business, stocks and bonds, jewelry, cars, and assorted other personal items of greater or lesser value. Taken together, these assets form an estate. And, for many of us, estate planning becomes part of our “to do” list. This may involve, among other things, preparing a Will, a Health Care Directive (also known as a Living Will) and a Power of Attorney, and setting up a Trust. Understanding what the various estate planning tools do and do not do is important for successful estate planning. Today we’ll be discussing truths and myths about a common type of trust, the “Living Trust,” also known as a “Revocable Trust. “
A Living Trust is a tool established during your lifetime for your benefit (and for the benefit of designated loved ones). You transfer some portion or all of your assets into the Living Trust to be managed by a Trustee that you have selected. Please note, you may designate yourself as Trustee. You may modify or terminate this trust at any time during your lifetime.
Elderly individuals may find Living Trusts useful tools in anticipation of disability or dependence on others. Under the terms of a Living Trust, if a person becomes incapacitated, the assets will be readily available to him or to designated individuals. A Living Trust also offers a person peace of mind that, upon her death, the trust beneficiaries will have relatively rapid access to the trust’s assets since Living Trusts generally avoid probate (a court process overseeing the administration of a Will). While probate is a cumbersome process in some states, it is relatively straightforward and inexpensive in New Jersey. That said, Living Trusts may be particularly advantageous for people holding assets such as real estate outside of their home states since probate will, in all likelihood, be avoided in the states where such real estate is held.
Myths:
You may have heard that a Living Trust: 1. provides protection from creditors; 2. serves to avoid income taxes; 3. avoids estate or inheritance taxes; 4. cannot be contested upon your death.
None of these myths is true! Placing some or all of your assets in a Living Trust does not remove those assets from the general pool available to your creditors. Nor does a Living Trust provide any income tax protection. And a Living Trust, in and of itself, does not provide any inheritance or estate tax planning protection. Finally, a Living Trust can be contested on such grounds as mental incapacity, undue influence, or fraud.
Getting Legal Help:
Experienced Estate Planning Attorney, Elga A. Goodman, can work with you on all your estate planning needs including establishing a Living Trust. She can help you understand your options and prepare an estate plan that reflects your unique circumstances and wishes. Contact us today at 973-841-5111.
Posted in: Estate Planning, New York Estate Planning, Trust Administration, Trusts