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An overview of trusts for New Jersey residents

Estate planning may seem daunting to some New Jersey residents because it can be complicated. An estate plan may require consideration of a person's personal preferences, cash flow, retirement needs, taxes, insurance and investment wishes, both currently and in the future. A basic understanding of how trusts work can help make the process seem less complicated.

Trusts are private agreements set up for a specific purpose, such as asset protection. A person can establish either a revocable trust, which may be changed, or an irrevocable trust, which may not. Trusts may be established during a person's lifetime or following death. A living trust may be established to keep the testator's wishes private or to allow for the transfer of assets during a person's life. Life insurance trusts may help reduce estate taxes by removing life insurance proceeds from a person's estate. These are common types of trusts set up during a person's life.

A testamentary trust is one established as part of a person's will. A minor's trust determines who will control assets if a minor should inherit. A credit shelter trust helps preserve tax credits for a living spouse, which can help reduce taxes for that spouse. A special needs trust can be established to provide for a disabled person's care, and may be created either during the life of the testator or following death.

Whether established during life or following death as part of a will, a trust can be a useful tool for ensuring that a person's wishes are followed. An estate planning attorney may be able to review a person's financial situation and give advice on which trust would fit his or her financial situation. The attorney may then assist with preparing paperwork to establish the trust.

Source: NJ.com Times of Trenton, "Szymanski: Trusts play vital role in financial planning", Eleanore Szymanski, June 02, 2013

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