Revocable Living Trusts are often recommended as a way of transferring assets to loved ones, in lieu of drafting a Last Will and Testament. The benefits of such a Trust are routinely stated: the need to avoid probate, privacy concerns and even avoidance of death taxes. While none of these stated benefits apply to residents of New Jersey, there are other more limited reasons to consider preparing such a Trust.
A Revocable Living Trust is created during your lifetime. A Trust document is prepared which describes how the assets are to be managed, and how they are to be transferred upon death. Everything you own is then placed into the Trust. Your house, your bank accounts, everything, is retitled into the Trust. In this way, nothing is titled into your name so that, when you die, there is nothing to go through probate. Your assets will be passed to your heirs as stated in the Trust document.
The Trust document also names a Trustee. The Trustee is the one who administers the Trust. If you create the Trust, you can be the Trustee. You can continue using and maintaining your assets just as you did before you created the Trust. You will also name one or more alternate, successor Trustees, who will take over if you become incapacitated, or when you die. The Trust document indicates how the successor Trustee will manage the assets. It will also state who will inherit the assets upon your death.
Because the Trust is “revocable”, you can change its terms or Trustees at any time. You can even revoke the entire Trust. However, upon your death, the Trust becomes “irrevocable” and the successor Trustee must abide by its terms. The average cost for this document is about $3,500.00 plus a new deed and other documents necessary to transfer assets into the Trust.
Revocable Living Trusts: The Negatives
So what are the negatives to having a Revocable Living Trust in New Jersey?
- There is no need to avoid probate in New Jersey. Unlike in many other states, probate here is inexpensive and takes little time. To probate a Last Will in New Jersey, an Executor need only bring the original Last Will and death certificate to the County Surrogate’s office. In about twenty minutes, and for about $150.00, the Last Will can be probated. The average cost of a Last Will is much less than $3,500.00, and the retitling of assets is not necessary.
- Privacy: there is no need to file an estate inventory in New Jersey. In some states, an Executor is required to file an accounting with the Probate Court listing all of the assets of the estate and the identity of the beneficiaries. If one has a Living Trust, instead of a Last Will, there is no need to file an accounting, and this information will not be made public. However, in New Jersey, even if you probate a Last Will, the filing of an accounting is not necessary. It remains between the beneficiaries. Nothing is made public in either case here.
- A Living Trust will not shield your estate from death taxes. This is a misnomer. Regardless of whether you have a Living Trust or a traditional Last Will, if death taxes are due, they will have to be paid.
- You must remember to title your assets into the Trust. If, after creating the Trust, you buy a house, open a new bank account, or invest, you must remember to put the asset into your Trust, and not take title in your name. Assets in your name are not controlled by the Trust or Trustee upon your death. A Last Will must then be probated.
Revocable Living Trusts: The Positives
And the positives to having a Revocable Living Trust in New Jersey?
- If you own real estate in another state, you will avoid the “ancillary probate” in that state. This is especially a positive if the property is located in a state like Florida, which has complex and costly probate procedures
- You can seamlessly carry out your investment and distribution strategies by avoiding the common “hiccups” caused by financial institutions in handling estates and Powers of Attorney. Financial institutions can freeze accounts owned by a deceased individual, require funds be placed into an estate account before being passed to beneficiaries, or refuse to follow a Power of Attorney document if it is more than ten years old. However, accounts owned by a Revocable Living Trust with successor Trustees can be managed seamlessly, without the need to open another account and transfer assets.
- If you have no one to act as your Executor, or agent under a Power of Attorney, you can name a Trust company as successor Trustee. Trust companies are highly regulated and are audited by the state on a regular basis. If you have no one to act on your behalf or if you just want to be sure that what you are planning is carried out properly and professionally, the appointment of a Trust company is an ideal option to consider. This option is especially valuable if you are caring for those with special needs and you are considering a Special Needs Trust.
Revocable Living Trusts Should be Considered for Your Estate Plan
Although having a Revocable Living Trust as part of your estate plan may not be as essential in New Jersey as it is in some other states, it has some benefits as compared to the extended probate process. Depending upon your circumstances, your family’s needs and how you wish to pass on your estate to others, it has some benefits to consider. If you are interested, we would welcome the opportunity to discuss your ideas and possible solutions, and help you determine if a Revocable Living Trust is the right thing for you.