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One of the most powerful estate planning tools people can utilize is a trust. Trusts are considered legal documents which allow the person setting it up to transfer their assets or property to a beneficiary upon the person’s death, although they are much different than wills since there is no probate process required with a trust like there is with a will.
A trust lawyer Cherry Hill, NJ trusts can help you determine what type of trust will work best based on your particular situation. The trust attorney you meet with can explain the difference between a living trust and an irrevocable trust and how they work.
With a living trust, which is also referred to as a revocable trust, all assets placed in the trust and a beneficiary is named. The trust remains in the control of the person who sets it up until their death. They can change or cancel the trust at any time. When the owner of the trust dies, then the assets in the trust are automatically turned over to the person who is named as beneficiary. There is not probate or waiting period for the beneficiary to receive their inheritance like there is with a will.
The owner does, however, have the option of naming a trustee to oversee the trust after they die if they feel the beneficiary is not responsible enough to handle all the assets of the trust on their own or if the beneficiary is a minor child.
There are steps that need to be taken to make sure that the trust is effective. All of your assets – including bank accounts, real estate, and stocks – are transferred into the trust. You will also want to make sure that all beneficiaries on life insurance policies and retirement accounts. It is also a good idea to have pour over will which can address any assets that may have not been included in the trust at the time of your death. This can include any assets that were obtained after the trust was set up and inadvertently not transferred over.
Irrevocable trusts work the similar to living trusts in that assets are transferred into the trust, a beneficiary is named, and since there is no probate process, assets are transferred to the beneficiary per your instructions (either upon your death or under the direction of a trustee).
There are differences between the two. First of all, an irrevocable trust cannot be changed or canceled. They are no longer considered part of your estate and you do not have access to them. Since they are no longer considered part of your estate, there will no estate tax applied to them.
Thank you to our contributors at Klenk Law for their knowledge about estate planning and trusts.