Sorting through decades of property and financial records can bring back memories of a first home or a growing business. Choosing who will receive those assets may feel personal when family members have distinct needs.
If you are considering a living trust, knowing what belongs there can help you plan your estate. A living trust is a legal arrangement you create during your lifetime that allows a trustee to hold and manage assets for the beneficiaries you name.
Choosing holdings that would need probate
Assets you own individually without a beneficiary designation may require probate, the court process for administering your estate. If illness leaves you unable to manage them, the person you name as successor trustee can act under its terms.
In New Jersey, assets held in a valid trust at your death do not require a state tax waiver for transfer. This waiver is the state’s written permission to release certain property after someone dies. Avoiding this requirement does not eliminate any New Jersey inheritance tax due. With those rules in mind, consider these assets:
- Real estate: Your home, beach house, rental units or vacant land might qualify. You will need to sign and record a new deed.
- Savings and investments: Cash reserves, stocks, bonds and mutual funds often fit. Your bank or brokerage firm can help explain the forms needed to change ownership.
- Business interests: Shares in a family company or a stake in a partnership may qualify. Check business agreements for limits on transfers first.
- Personal belongings: Jewelry, antiques, furniture and family heirlooms can also be suitable for your living trust. A written assignment records the change in ownership for items without titles.
- Intellectual property: Copyrights, patents and royalty interests can also warrant consideration. Document these transfers in writing and check any contracts for restrictions.
While these assets are common candidates for a living trust, others may require a different approach because of their tax treatment.
Keeping tax rules in view
Other assets may need a different approach because federal law gives them special tax benefits. Keep IRAs, 401(k)s and similar plans in your own name instead of changing ownership to your living trust. Taking funds out to place them there could trigger income taxes. Your choice of beneficiary controls who inherits and naming a trust may require a review of distribution requirements.
Health savings accounts also need to remain in your name, so confirm who will receive those funds. For vehicles, compare trust ownership with New Jersey’s transfer-on-death designation and confirm insurance coverage.
Completing your living trust’s funding
Finalizing the paperwork can give your instructions practical effect. Keep proof of each change together so your successor trustee may confirm what the arrangement holds.
Update those records after a purchase or sale, and review your instructions when your family circumstances change. An estate planning attorney can identify funding gaps and align your documents with your intentions.