If you have a will in place, you are ahead of the game. It is now widely understood that more then two out of every three American adults has not yet begun to formalize an estate plan. By having a will in place, you are better ensuring that your wishes are legally enforceable and that your preferences will be respected upon your death. You are also making life easier for your surviving loved ones who will not be questioning what your wishes are or how to carry them out.
However, it is important to remember that wills are not the only estate planning tools that American adults can use to ensure that they’re surviving loved ones are protected. Some estate planning tools can even be useful well one remains living. For example, creating a trust can minimize your tax liability and can help you to achieve specific financial goals in life. Creating a different kind of trust can help to protect the interests of your loved ones after you are gone. Exploring the options associated with creating a trust may, therefore, be well worth your time and effort.
Trusts: The Basics
As an experienced NJ trust lawyer – including those who practice at Kaplan Law Practice, LLC– can confirm, there are several different kinds of trusts that can be used for various financial and estate planning purposes. Each of these trust “types” tends to fall into one of two categories: Revocable and irrevocable. Revocable trusts may be altered once they’ve been executed. Most of the time, once an irrevocable trust has been executed, it cannot be altered or “taken back.”
Assets are placed in a trust and are governed by the terms of that trust. Say, for example, you have placed a significant amount of money and a few investments into an educational trust for a grandchild. You can, as the trust creator, dictate the terms upon which your grandchild can receive the money. For example, you can insist that the funds in the trust may be used only for educational purposes. In the event that your grandchild doesn’t attend college or a university, they can only access these funds once they’ve reached the age of 30.
Revocable Living Trusts
One popular trust type is used very frequently as an estate planning tool. Revocable living trusts can be used in place of a will. Why would you want to go through the hassle of setting up a trust if you can simply dictate your asset distribution preferences in a simple will? Placing your assets in a revocable living trust allows you to benefit from income generated by its assets during your lifetime. Upon your death, these assets transfer automatically to your beneficiaries, which allows your estate to bypass the burdensome, costly, time-intensive, and stressful process known as probate. Setting up a trust can also help you to avoid certain taxes. As a result, even if you already have a will in place, creating a trust may be a worthy use of your time.