Getting your estate ready for when you die is necessary to secure your family’s future. One way to do this is to create a living trust. If you’re in New Jersey, this guide will walk you through the steps to create a living trust and examine the advantages and disadvantages for your financial situation.
A financial advisor can help you create an estate plan for your family’s needs and goals.
How to Create a Living Trust in New Jersey
Here are six basic steps for creating a living trust in the Garden State:
- Decide on the type of trust you want to form: If you’re single, you’re almost certain to want a single trust. If you’re married, though, you may consider a joint trust. This allows you and your partner to both put your own property into the trust, as well as to store jointly owned property like cars or homes.
- Take stock of your property: Choose what you want to store in the trust. Most of what you own is eligible to go in the trust. There are exceptions, like 401(k) plans, but you can name your trust as a beneficiary. Also, take the time now to gather relevant documents like deeds and car titles.
- Pick a trustee: This person will be in charge of distributing your assets to your beneficiaries. You can name yourself as trustee for now or pick someone else. If you name yourself, you’ll also need to pick a successor trustee to take over management of the trust when you die. Now is also the time to decide which beneficiary will get what.
- Create the trust document: You can use an online program or create one with a lawyer.
- Get the trust document notarized: Go to a notary public and sign the document.
- Fund the trust: This means transferring your property into the trust. You can do this yourself, but it can be complicated, so getting help from a lawyer might be a good idea.
What Is a Living Trust?
A living trust is a legal framework. It is established by a document and can be used to store property and assets. A trust has a trustee who manages the property and distributes it to relevant beneficiaries. You can name yourself as trustee or give that job to someone else.
There are two types of trusts: irrevocable living trusts and revocable living trusts. An irrevocable living trust is permanent. Once property is placed in an irrevocable living trust it can’t be removed unless you get permission from everyone named in the trust. The property placed in the trust is wholly owned by the trust, and taxes are paid through the trust.
A revocable trust, by contrast, has flexibility. Property can be removed as needed and the trust can be modified. You maintain ownership of the property and pay taxes as usual.
How Much Does It Cost to Create a Living Trust in New Jersey?
The cost of forming a living trust depends on how you go about doing it. One option is to use an online program to write the trust document yourself. This will likely cost you around a few hundred dollars. You can also choose to hire an attorney. This option will probably cost you more than $1,000, though the exact cost will depend on the attorney’s fees and the complexity of your estate.
Clearly, it is cheaper to create your trust yourself. There are some dangers to DIY estate planning though. It requires a lot of attention to detail and you’ll need to do all of the research yourself. Unless you feel up to that task, it might be smarter to get a lawyer. Just make sure to know the lawyer’s fees upfront and to find someone who is a trust specialist, not just an estate planner.
Why Get a Living Trust in New Jersey?
Most people form a living trust to avoid probate court. This is a process that most estates go through, and it can be time-consuming and constitute an invasion of privacy. New Jersey, however, is one of the states that’s adopted the Uniform Probate Code. This simplifies the probate process and means that a living trust may not be particularly useful, especially for smaller estates.
There are other reasons to get a living trust though. If you want to leave property to a minor, a living trust can be used to store that property until the child comes of age. A living trust can also help you avoid conservatorship in the event you become incapacitated, as you’ll already have a trustee.
Who Should Get a Living Trust in New Jersey?
It is commonly believed that a living trust is only for those with a lot of money. While that is generally not true, the Uniform Probate Code means that in New Jersey it might not be worth getting a living trust unless your estate is especially large and complex. The state also offers a simplified probate process for estates with no will that are worth less than $20,000 ($10,000 if there is no living spouse).
Living trusts are also more difficult and costlier to set up than wills. Additionally, they provide a longer window for potential legal challenges than wills do, possibly making things more difficult for your family after you’ve died.
Living Trusts vs. Wills
You’ll still need a will if you have a living trust, in case any property you want passed on is not in the trust. A will can also do the following things that a living trust can’t:
- Name an executor
- Provide instructions on how to pay taxes and debts
- Establish guardianship for children who are minors
- Select managers for children’s property
This chart compares wills and living trusts to give you a better idea of what each estate planning document can offer:
Living Trusts vs. Wills
|Names a property beneficiary||Yes||Yes|
|Allows revisions to be made||Depends on type||Yes|
|Avoids probate court||Yes||No|
|Requires a notary||Yes||No|
|Names guardians for children||No||Yes|
|Names an executor||No||Yes|
Living Trusts and Taxes in New Jersey
As of 2018, there is no estate tax in New Jersey. There is a federal estate tax though, which applies to estates worth more than $12.06 million ($24.12 million for couples).
There is an inheritance tax in New Jersey. Your beneficiaries will pay this tax after they receive their inheritance. The tax rate will depend on the beneficiary’s relationship to the deceased. If the beneficiary is a spouse, civil union partner, domestic partner, child, grandchild, great-grandchild, parent, grandparent, mutually acknowledged child or stepchild, he or she will owe no tax.
Making a living trust in New Jersey requires some work, but it isn’t terribly hard. You can do it by yourself or with the help of a lawyer. While making a living trust can’t hurt, the Uniform Probate Code in New Jersey means that for all but the largest and most complicated estates it might be more trouble than it’s worth. But remember: Even if you do decide to forgo creating a living trust, you’ll still need an estate plan.
Estate Planning Tips
- Estate planning isn’t easy. A financial advisor can help you work through all the details to set up a living trust. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Don’t forget to update your will and estate plan as you age and experience life changes. Buying a house or selling a car can impact your living trust or will, so take those changes into account as they happen.
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