Most New Jersey residents are aware that there is a need to address estate planning at an early age. However, quite a few hold common misconceptions about the process or individual aspects of estate planning. The following are just a few issues that are commonly misunderstood, and which can lead to serious consequences if not properly addressed.
One common belief is that an individual does not need to create a trust until their level of wealth exceeds $5 million or some other stated value. In reality, trusts are an important estate planning tool that can be put to use for people who hold far less wealth. The decision to create a trust actually has very little to do with one’s overall level of wealth, and more to do with how they would like to be able to control those assets.
A trust is a very flexible planning tool, and can be created in the manner which best suits an individual or family. A trust allows a family to avoid probate court, which is a huge advantage and a gift for loved ones who will already be handling their emotional reactions to their loss. A trust also allows an individual to control who, how and when funds are received. Provisions can be put into place to avoid losses through divorce, remarriage or attacks from creditors.
The advantages of a trust over a will are simply too numerous to include in this format. Suffice it to say that this is a powerful tool that virtually all New Jersey residents should consider when addressing their estate planning needs. As with any significant financial topic, gaining a comprehensive understanding of how trusts work is important in making a wise decision.
Source: The Times Herald, “Matt Wallace: These are the top eight estate planning misconceptions,” Matt Wallace, July 12, 2014