For many people, inheritance taxes can impose a substantial burden during a time of grief where there is enough stress and change to navigate already. They can seriously impact one's ability to ensure that one's heirs and beneficiaries are well provided for, and they also create financial planning hurdles that often need to be overcome. While creative solutions like moving across state lines to avoid inheritance taxes have become increasingly popular, family trusts are often more secure, more predictable, and easier to manage in the long run.
On top of the fact that trusts help to defer estate and gift taxes and can sometimes eliminate them entirely, you can gain a few other monetary advantages when you decide to use them to manage your assets:
- They eliminate the costs of probate court, which can be five to seven percent of the estate.
- Trusts protect your assets from creditors and lawsuits as well.
Trusts also deliver a number of administrative and logistical advantages that you can use to ensure that your estate is managed as you wish:
- Set the conditions of your heirs' access to funds and assets
- Name trust managers during your lifetime if you become incapacitated
- Dictate the balance of assets to be held for future generations
- Retitle assets into the trust to protect them legally.
Setting up a trust
Most estate planning attorneys can help you set up a trust in any of the various formats that you need, including generation-skipping trusts and credit-shelter trusts that can help to reduce or eliminate estate taxes. When you consult with an attorney about setting up your trust, it is important to remember that there are four key elements to making sure your wishes are executed exactly as you intend:
- The trust itself
- A living will
- A standard will
- Your healthcare proxy
By making sure all four of these documents are in order, you are able to protect the trust, to cover any belongings or assets not retitled to the trust, to ensure your relatives and loved ones understand your wishes should you become incapacitated, and to name someone to oversee your health care decisions when you are incapacitated. Once all of those bases are covered, your trust should be set up in a way that fully protects your assets.
If you have questions or concerns about wills, estate taxes in New Jersey, or setting up a trust for your estate, your next step should be discussing your situation with an estate planning attorney.