What is a Revocable Living Trust - Estate Planning in New Jersey

A trust is a legal arrangement in which a grantor transfers their assets into a trust, which is managed and protected by a third party (the trustee) until the trust's conditions are met, at which point the assets are transferred to the beneficiary. A revocable living trust is the most common kind of trust in estate planning. This flexible legal arrangement is created during the lifetime of the grantor and allows them to maintain control over their assets, change the terms or assets included in the trust, and avoid probate after death.

Here is what you need to know about revocable living trusts.

Avoiding Probate

During the New Jersey probate process, a judge looks over the debts and assets of an estate to determine the best way to distribute assets. If a will is available, the court will take into consideration the contents of the will. While a judge is unlikely to distribute assets contrary to the wishes laid out in the will, a judge must take NJ probate law into consideration.

When you put your assets into a revocable living trust, they completely bypass the probate process. The trust becomes the legal owner of the named assets, and upon the grantor's death, all assets named in the trust transfer ownership directly to the beneficiaries. Wills are also a matter of public record, but a trust remains confidential. A trust can also remove the need for your estate to go through multiple probates if you own property in multiple states.

Distributing assets from a revocable living trust is a faster, more efficient, and private way of transferring ownership of assets after death. While you will still need a will, the trust protects you, your assets, and your beneficiaries.

Funding The Trust

Your revocable living trust is only effective if you transfer your assets into the trust. Any assets not titled in the name of the trust will have to go through the NJ probate process. You can create a common provision in your will stipulating that any assets not titled to a trust will “pour over” into the trust at the time of your death. This is a legal safety net to ensure any overlooked or forgotten assets do not have to pass through the probate process.

Tax Concerns

It is important to note that not all trusts are the same when it comes to protecting your assets from creditors. A revocable living trust does not offer any creditor or tax protections. Assets held by the trust are still considered part of your estate since you maintain control over these assets. This makes any assets in your revocable trust taxable and accessible to creditors. Understanding these limitations can help you prepare your estate and your beneficiaries for what comes after you pass.

Veitengruber Law is an experienced NJ estate-planning law firm. We can work with you to determine your unique estate planning needs and ensure your assets are protected. Estate planning can provide peace of mind that your loved ones and assets are protected no matter what. If you are considering a revocable living trust, we are ready to discuss your next steps.