Many people have questions when it comes to the issue of whether to place their assets in a living trust in order to avoid the probate process. Oftentimes people hear how cumbersome or expensive the probate process can be, and feel that it would be best to avoid it at all costs.
It is true that the probate administration process has the potential to be expensive and/or complicated, depending on the individual situation. Also, in some states the probate process can be more cumbersome in general than in other states. Individuals who live in states with very expensive or complicated probate processes may benefit from placing assets in a living trust, since it will allow them to avoid the probate process.
But in states where the probate process is relatively simple, it may not be so critical to completely avoid the probate process. New Jersey’s probate process is relatively simple and inexpensive. In New Jersey, an executor can file the required forms 11 days after death. Within a couple days of filing the forms, the executor will receive a legal document allowing him or her to begin handling matters with the estate
One thing to keep in mind for estate planning is that setting up a living trust is not always a simple alternative to probate. All money kept in trust is subject to federal and state inheritance taxes, meaning that there will no tax savings. Another thing to keep in mind about living trusts is that an accountant may need to be hired to handle the trust if it is a large one. Following the death of the trustor, the trustee will be required to do an accounting of any assets to the IRS, the state in which the trust was formed, and the heirs of the trustor. Prior to distribution of any trust assets, creditors will need to be paid, along with taxes.
Some experts say that living trusts are not particularly beneficial in states like New Jersey, where the probate process is fairly simple and inexpensive. But, of course, there may be certain situations where a living trust truly is the better alternative. One such situation may be leaving assets to an adult handicapped child who requires financial protection.
Source: newjerseynewsroom.com, “Managing your elder’s assets,” Carol Abaya, 20 June 2011.