When an estate plan is created, it allows a person to prepare for what will happen to their assets when they die. There are several different ways a person can make this plan, one being the creation of trusts. A trustor creates this so that a beneficiary can receive their assets. A trust is an arrangement that gives a third individual, the trustee, the right to manage these assets on behalf of the beneficiary.
When a person wants to create a trust, it is important to understand that there are several different types of trusts that can be created. Each trust serves its own purpose so that it is specific for the individual or entity that will receive it. An experienced attorney can guide the trustor during this process to ensure they create the right trust for their estate plan.
A common trust that is created in the state of New Jersey is a revocable trust. This type of trust is able to be modified, changed, or discontinued at any time during the trustor’s life if they choose to do so. This can be done without the permission of the beneficiary as long as the trustor is of sound mind to do so.
Another common trust is an irrevocable trust. Different from a revocable trust, a trustor is required to relinquish their rights to the assets as soon as it is created. Once this is done, they are unable to make changes or terminate the trust at any point during their life.
Life Insurance Trust
With this type of trust, the trustor is able to remove their life insurance from the estate. In doing so, the beneficiary to the trust may be free from paying taxes that are placed on the trustor’s life insurance policy through their estate plan.
It is important to know that there are two different types of charitable trusts: a charitable leads trust and a charitable remainder trust. A charitable leads trust allows the trustor to choose which charities receive interest from their gift for a set period of time. When this is over, whatever is left of the trust can be given to the trustor’s family or other designated beneficiaries. A charitable remainder trust allows charities to receive the assets when the trust term ends. Until it does, the donor receives the interest instead of the charity.
Special Needs Trust
A trustor can create a special needs trust if they have a loved one with a disability. Through this, the trustor is able to leave behind assets that supplement any benefits that the special needs individual would be given from government programs. This allows them to make sure the individual receives the necessary financial support they may need in life.
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Juan C. Velasco, Esq. is a trusted attorney who concentrates on bankruptcy, family law, real estate, and estate matters who has been serving the New Jersey area for over 20 years. If you are in need of experienced legal counsel, please contact Velasco Law Office and we will be happy to assist you.