New Jersey residents who have accumulated a fair amount of assets may consider putting them into a trust for their intended beneficiaries. There are two general types of trust: revocable and irrevocable.
One of the biggest differences between the two types of trusts is that a revocable trust can be changed or rescinded, while an irrevocable trust cannot, without a court order or the agreement of all beneficiaries. Another difference is that control and ownership of the trust is given to a third party in an irrevocable trust.
Tax savings
Creating a trust that cannot be modified or revoked may not initially sound like a good idea, but there are many advantages to an irrevocable trust. If your estate is large, you may face high estate taxes, and any assets placed into an irrevocable trust will not be subject to these taxes, reducing your overall estate tax burden.
Safeguarding your assets from creditors
Assets that are placed into an irrevocable trust will also be protected from any creditors who attempt to garnish or take away your assets to satisfy a debt or judgment. Because you no longer control the assets, they will be safe from creditors, if there is no evidence the assets were placed into the trust with an intent to defraud creditors.
Putting your assets into either type of trust provides you with the opportunity to avoid having your assets distributed through the probate process, which is complicated, costly and quite lengthy. Taking the time now to shield your assets from probate is a prudent decision.
Setting up a trust involves adhering to various requirements and having proper documentation. Estate planning attorneys can help make sure everything is done correctly pursuant to any legal requirements.