Main Types of Trusts and Identifying the One That Fits Your Needs

May 5, 2022

An Estate Planning Lawyer can Provide You With Valuable Information Regarding the Different Types of Trusts in Rumson, Colts Neck, Freehold, and other Monmouth County Towns

Main Types of Trusts and Identifying the One That Fits Your Needs in NJPlanning for the distribution of your estate after you have passed can be an uncomfortable topic.  That being said, you need to decide now with an estate lawyer to make sure your wishes are carried out after you are gone.  There are many ways to do this, and your lawyer can help you choose which is best for you and your family.

Main Roles and Responsibilities in a Trust

There are four people involved in a trust:  the trustor, who has expressed their plan to divide their assets and has left them in the hands of the trustee, who takes care of the distribution of the assets once the trustor has passed. Then the beneficiary (there can be more than one) receives the assets as deemed by the trustor, and the estate lawyer helps with all legal matters.

The grantor (also known as the settlor or the trustor) is the person who compiles the trust, adding assets, property, and other possessions. The trustee can be either a person or an organization responsible for temporarily holding the property without owning it outright. Their job is to follow the outlined requests in the trust in the manner that best benefits the grantor and the beneficiaries. It is of utmost importance that the trustee is reliable, responsible, and knowledgeable regarding all trust matters and willing to work with the estate lawyer to carry out all directives.

Primary Purpose of Creating a Trust

Trusts protect the trustor’s assets and guarantee those assets are bequeathed to their recipients (beneficiaries) in the way they are stipulated.  A trust avoids probate, reduces paperwork, saves time, and in some cases can avoid or reduce inheritance or estate taxes.

How Trusts Work in New Jersey

The person who receives the assets and properties from the trust is the beneficiary.  It is possible to have many beneficiaries in trust, and depending on how the trust is set up, they will receive a percentage of the assets.  For example, if Mr. and Mrs. Garner set up a trust where their children receive 12%, the grandchildren receive 6%, and family friends 4%.

The property is what is distributed.  Sometimes it is referred to as the principal or corpus, and it can consist of cash, bonds, cars, property, and artwork.  These items can be placed in a living trust while the grantor is still alive. Once the grantor passes away, if the will indicates it, other items can be added to the trust.

Taxes are paid by the trust through a federal identification number and, at times, using the grantor’s tax number.

Different Types of Trusts to Choose From

The four most common types of trusts are living trusts created at the same time the grantor is alive; trusts created after the grantor’s death known as testamentary trusts; revocable trusts which can be altered or struck down by the grantor; and irrevocable trusts which cannot be changed at all. The grantor or the trustee can change revocable trusts. The grantor can transfer assets and property to the trust at will. The grantor is the first trustee for the living trust.  The trust becomes irrevocable when the grantor passes away.

A Totten trust, also known as a poor man’s trust, is typically used for bank accounts and certificates of deposit. It is not used for more significant assets and properties.  The grantor can transfer the account to the beneficiary before or after the grantor passes away.

A marital trust is set up as a joint or separate trust.  Many people assume the surviving spouse is entitled to everything; however that isn’t always the case.  When a married couple establishes a marital trust, the couple must decide whether the trust will transfer all of the assets to the remaining spouse or divide the support between the living spouse and any heirs. A joint trust covers both people in the marriage, meaning it is less complicated and expensive to create.

A special needs trust is when a disabled beneficiary may lose their Medicare or Medicaid benefits, but SS rules permit them from receiving a special needs trust as long as they are not the trustee. The beneficiary cannot revoke the trust, nor can they control the amount received.  If the trust would cause the beneficiary to lose their benefits, there is a special provision that stops the trust if it will affect the eligibility benefits for the beneficiary.

A generation-skipping trust has grandparents as grantors and their grandchildren, or other people at least 37.5 years younger than the grantor as beneficiaries. This kind of trust is used to avoid estate taxes, which have doubled and will recede in 2026.

A spendthrift trust transfers and protects assets, but the grantor sets it up with a kind of beneficiary in mind.  If the beneficiary has problems with substance abuse, gambling, or general finance mismanagement, the grantor and the trustee can establish stipulations on the transfer of assets.  This can include a maximum disbursement every month, every week, or however it is set up.

How to Choose the Best Trust for You in Monmouth County NJA charitable trust can be made as a CRT (Charitable Remainder Trust) or a CLT (Charitable Lead Trust). A CRT is irrevocable.  You receive a tax deduction according to the assets marked for the charitable foundation, which will be given upon your death.  The CLT is one payment made to a charity across the top, and then what remains is distributed among the beneficiaries.

A pet trust is not something you see every day. Still, as many people consider their furry babies as family, a pet trust provides the care needed to assure that your pet will continue to live comfortably.

Contact an Estate Planning Lawyer to Decide the Best Trust for You at our West Long Branch NJ Office

No one likes to talk about death.  The nervous, morbid feeling gives us the sense that if we ignore it, it will never come.  That just isn’t true.  In fact, you will find great relief in the knowledge that your affairs are in order now.  If you change your mind, want to add items, or change everything altogether, your wills and trusts lawyer is there to advise you.

Chamlin, Uliano & Walsh can provide you with a knowledgeable, detail-oriented, thorough lawyer.  Our services in wills and trusts will guide you and provide the advantages and disadvantages of each option.  Every case is unique, and we know that your most important goal is to provide for your loved ones after you are gone. Contact us for help choosing and establishing the right type of trust for you in Middletown, Belmar, Long Branch, Eatontown, Manasquan, Red Bank, Little Silver, Neptune, and towns throughout Ocean and Monmouth County.

Call 732-440-3950, toll-free at 888-328-9131, or look for us online to get your free consultation or set up an appointment. It’s never too early to prepare for the future.

Categorised in: Estate Planning, Wills & Trusts