E.A. Goodman Law, LLC regularly advises clients throughout New Jersey about the benefits of trust-based estate plans. By establishing an irrevocable trust, you can achieve a number of estate planning objectives and ensure that your assets will be properly managed now and in the future.
Whether your goal is to protect your assets, plan for long-term care, provide for a loved one with special needs, leave a charitable legacy, or preserve your wealth, you need the informed representation we provide. Contact our Morristown office today to speak with an experienced estate planning attorney.
What is an irrevocable trust?
Generally, there are two types of trusts, revocable living trusts and irrevocable trusts. A revocable trust is one that takes ownership of your assets but allows you to continue managing them during your lifetime. The primary purpose of a revocable living trust is avoiding probate, which becomes unnecessary because you no longer own the assets, provided that they are properly transferred into the trust.
By contrast, an irrevocable trust is one that becomes effective during your lifetime, but cannot be amended or modified: assets that are transferred into the trust remain in the trust permanently. As the “grantor” you no longer own the assets, rather a trustee is appointed to manage the assets for the benefit of the beneficiaries. Because you no longer own the property, it is not subject to estate taxes, probate, and creditors’ claims.
Types of Irrevocable Trusts in New Jersey
There are various irrevocable trusts designed to achieve a number of objectives. Some of the most common include:
This estate planning tool has traditionally been used by married couples with substantial estates to reduce estate taxes upon the death of the second spouse. In this arrangement, the property of the spouse who predeceases the other spouse is transferred into the trust for his or her benefit. In this regard, the surviving spouse can use the income from the trust property, but it does not become part of the estate and is not subject to estate taxes.
Given that only about 1 percent of estates are subject to estate taxes under present federal tax laws, bypass trusts have become less common; however, tax laws are subject to change.
Special Needs Trust
This type of irrevocable trust is designed to provide for a disabled child or adult who is receiving public benefits such as Medicaid. Because a large inheritance could disqualify an individual with special needs from these vital benefits, a special needs trust holds assets that are used to cover the beneficiary’s day-to-day needs while preserving his or her eligibility for benefits.
A spendthrift trust is specifically designed to protect a beneficiary who is unable to manage his or her finances, is at risk of creditors’ claims, or who has a problem with alcohol, drugs, or gambling. In this arrangement, assets are transferred into the trust, which is managed by the appointed trustee. Depending on the terms of the trust, the trustee can provide funds to the beneficiary on a scheduled basis, or, alternatively, pay the beneficiary’s monthly expenses directly.
Our elder law and estate planning firm regularly advises clients about long-term care and Medicaid planning. Many are surprised to learn that Medicaid is the single largest payer of skilled nursing care, however, many estate planners do not qualify based on their income and assets. One solution is to create an Irrevocable Medicaid Trust whereby your assets are transferred into the trust, which means the assets are not counted as resources for Medicaid eligibility limits.
This type of trust is designed for those who wish to leave a charitable legacy and minimize estate taxes by combining gifting with charitable donations. In a charitable remainder trust, for example, property is transferred into the trust with a charity named as the final (or remainder) beneficiary, and another individual receives income from the trust for a certain time period.
Life Insurance Trust
Although life insurance passes outside of an estate, the proceeds of a life insurance policy are counted toward the total value of the estate, which could have estate tax consequences. An Irrevocable Life Insurance Trust (ILIT) is one that takes ownership of the life insurance policy and designates a trustee to distribute the proceeds to the designated beneficiaries upon the grantor’s passing.
Why You Need an Experienced New Jersey Irrevocable Trust Attorney
At E.A. Goodman Law, LLC, we provide comprehensive estate planning services tailored to each client’s unique needs and goals. Principal attorney Elga Goodman has a well-earned reputation as an astute elder law and estate planning attorney who provides her clients with compassionate, efficient representation.
When you consult with us, we will take the time to understand your circumstances and work with you to create an irrevocable trust that achieves your objectives. Please contact our office today to schedule a consultation.