People usually create their estate plan when they cross a certain age. When creating an estate plan, they come across several terms such as will, trusts, power of attorneys, and more. These terms may sound familiar and straightforward, but in reality, understanding and implementing them in the right way can be challenging.
To ensure that your estate plan says and implements what you wish, you should know every aspect of estate planning. A New Jersey elder law professional can help you understand the basics of estate planning and help you build your estate plan in the right way.
When making an estate plan, several things are to be considered; one of them is trust. A trust is used for minimizing estate taxes and can offer other benefits.
- Probate avoidance:
If you have one or more trusts, you can avoid court proceedings that can be lengthy and expensive.
- Reduction in taxes:
A person making an estate plan can reduce their estate and gift taxes on an estate with the help of one or multiple trusts.
- Control over disbursement:
Disbursement is the payment of money from a fund. A trust allows more control over disbursement than a standard will.
What should I know about the basics of a Trust?
A trust relationship is basically when one party transfers its property to a second party and the second party, in turn, transfers it to the third party. A few essential elements of trust have to be known before establishing a trust relationship.
- Trust must have a grantor:
The person creates the trusts and delivers assets to heirs or other beneficiaries.
A trust must also have a trustee with a revocable trust. The grantor is a trustee and names a successor trustee after their death.
- Other important elements:
A trust must also include named beneficiaries, funding, and terms.
Types of trusts.
There are a variety of trusts present; a trust can either be living or testamentary.
- Living trusts:
The living trust is a trust that is active during the grantor’s lifetime. These are further classified into two types. The revocable living trust can be revoked at any time during the grantor’s( trustee) life, while the irrevocable trust cannot be changed or revoked. Therefore, the grantor cannot recede the assets transferred into the irrevocable trust.
- Testamentary trusts
Testamentary trusts are a type of trust created using provisions of the last will. Therefore, it does not come into action until the grantor is dead.