Attorney Guidance for Irrevocable Trusts in New Jersey

Benefit From Our Estate Planning Lawyers’ Knowledge and Experience Handling Life’s Uncertainties and Modifying Your Irrevocable Trust as Needed.

You may have heard of a trust as an estate planning option. It is a legal document allowing the trust owner to pass their property to heirs while the grantor or grantors are still alive. One type of trust is an irrevocable trust. New Jersey defines it as an agreement between an individual and a trustee to hold, manage, and distribute trust property according to the terms of the trust for the benefit of the trust maker, or grantor, and their beneficiaries. An irrevocable trust must conform to New Jersey law and regulations regarding the trust creation and trustee management.

Exploring the Advantages of Irrevocable Trusts

An irrevocable trust essentially gives all property and assets listed in the trust to the trustee, relinquishing control over them, so why would someone make one? An individual may have specific needs for an irrevocable trust, such as asset protection from creditors, providing financial support to beneficiaries in the future, failing health, strained family relations, and savings on estate taxes and probate costs and fees. An irrevocable trust does not go through probate, so another trust benefit is privacy. Your heirs, property, and wishes are not part of public records in a courthouse.

To modify or create an irrevocable living trust, connect with a seasoned estate planning attorney at Chamlin, Uliano, and Walsh serving Monmouth and Ocean County areas, such as Freehold, Colts Neck, Long Branch, Red Bank, Wall Township, Manasquan, Bradley Beach, and other towns. Contact us at (732) 440-3950 or submit our online intake form to schedule a private consultation.

Decanting as a Tool for Irrevocable Trust Changes

Before the Uniform Trust Code, some irrevocable trusts could not be modified or terminated without a court order. Most estate planning attorneys recommended making a new trust and transferring assets to it to avoid the time and cost of a court order. That may still be the best way today in certain circumstances. The trustee of an irrevocable trust is typically empowered to transfer assets to benefit the trust beneficiaries, so the transfer, called decanting, funded a new trust.

Modifying Irrevocable Trusts Under the Uniform Trust Code

After the Uniform Trust Code, irrevocable trust modification is more accessible. Now, the beneficiaries and trustee must consent to modifying or terminating the irrevocable trust when modifying or terminating the trust is aligned with the trust’s “material purpose” (N.J.S. 3B:31-27). Alternatively, all beneficiaries may modify or terminate the trust by consent and court order when doing so is consistent with the trust’s “material purpose.” However, even if beneficiary consent is not unanimous, a court can modify or terminate a trust when the non-consenting beneficiary is protected.

So now, modifying a non-charitable irrevocable trust is by court order or by consent of the interested parties in a Non-Judicial Settlement Agreement (NJSA). The latter is the less expensive and time-consuming method. Obtaining court approval for a modification requires filing paperwork called an order to show cause with the court and serving it on all interested parties. The order to show cause must give grounds and proof to convince a court that the proposed modification is consistent with the trust’s purpose.

Streamlining Irrevocable Trust Amendments through Consent

One way to prove the modification is consistent with the trust’s goals is unanimous or the grantor’s consent. When the grantor and beneficiaries consent to a modification, they likely indicate that it aligns with the trust’s purpose. But even if the modification is not aligned with the purpose of the trust, full consent may still allow it. Only when the grantor or a beneficiary does not agree to the modification can the court decide.

When the grantor or some beneficiaries do not consent, a court must determine whether the modification contradicts or conflicts with the purpose of the trust. A court may still find the modification appropriate, even without unanimous consent or after the grantor is deceased. However, an NJSA is the quickest and least expensive way to modify an irrevocable trust, so unanimous consent is the aim.

It is important to note that not all beneficiaries or grantors can consent. For example, an incompetent, minor, or unborn beneficiary cannot consent. Those who can represent beneficiaries unable to consent are conservators (for the incapacitated), guardians (for minors), agents (by power of attorney), personal representatives (for the deceased), parents (of unborn children), and trustees on behalf of the beneficiaries.

The Adaptability of Irrevocable Trusts via Non-Judicial Settlement Agreements (NJSA)

Obtaining consent via NJSA can more easily deal with life issues that make modifications necessary. For example, when a trustee dies, becomes incompetent to fulfill their duties, or resigns, a modification is required to replace them. A modification may be necessary for a beneficiary who goes bankrupt, gets divorced, or becomes addicted to substances. A grantor may move, requiring changes to the trust. But even ordinary accounting and administration provisions may need revision when problems occur.

As is evident, an irrevocable trust is now a more flexible estate and tax planning vehicle. And while an irrevocable living trust avoids income tax and inheritance tax, it can generate gift tax liability valued on the property transferred to the trust when created. However, that is a one-time tax. Once property is in the trust, it is no longer part of the grantor’s taxable estate and, thus, appreciable property in an irrevocable trust is not taxed on its increased value.

The Crucial Role of NJ Estate Planning Attorneys in Irrevocable Trusts

The right estate plan depends on your circumstances, property, health, relationships, and other significant considerations. An irrevocable living trust may be the wisest choice, given its flexibility to adapt to your life as it changes. However, before making decisions about trusts, you should consult an experienced estate planning attorney.

The benefit of a thorough explanation of the advantages and disadvantages of an irrevocable trust is the least you get at an initial consultation with an estate planning attorney. At Chamlin, Uliano, & Walsh, we can offer options to fit your unique situation, whether you have a special needs child or grandchild, a successful business, a diversity of assets, or one income-producing asset. You will get legal and tax advice, as well as your questions answered. We can handle the legal side of things as you work with your accountant or financial planner to determine your case’s financial and tax components that need addressing.

Let Our Asbury Park Estate Planning Attorneys Address Your Irrevocable Trust Concerns

The advantage of an estate planning consultation is the invaluable experience that can help you plan and consider the possibilities of changes in relationships, career, and health. You get the benefit of our estate planning lawyers’ years of experience with the what-ifs in life and knowledge of the laws and procedures to modify your trust should you need to one day.

When you are considering an irrevocable living trust modification or a new irrevocable living trust, speak to a highly-respected estate planning attorney with years of experience near you in Monmouth and Ocean County areas, such as Howell, Eatontown, Neptune, Middletown, Ocean Township, Seaside Heights, Belmar, and Wall. Call (732) 440-3950 or fill out our online intake form to set up a confidential consultation.