Types Of Trusts
If the total value of your assets, including your home, investments, business interests and personal property exceeds $675,000 ($2,000,000 effective January 1, 2017), your estate will be subject to New Jersey estate taxes. If your net worth exceeds approximately $5,490,000, your estate will be subject to federal estate taxes.
It is important to understand that these exemption levels may change in the future and to design a flexible plan that can attempt to adapt to changes in the exemption level.
To discuss how you can minimize the effects of federal and New Jersey estate taxes through the creation of trusts. Contact an estate planning attorney at the law firm of D’Alessandro & D’Alessandro, LLC. We will take the time to explain how to plan effectively for your future and your family’s future. We serve clients throughout the areas of Bernards Township, Basking Ridge and Bedminster.
Some of the more common trusts, which can be used to preserve assets and meet other estate planning goals, include:
Credit shelter trusts: By setting up a credit shelter trust, a married couple can avoid large estate taxes after one of their deaths. This is often called an A-B trust because it sets up two trusts that protect a couple’s estate from federal estate taxes after each of their deaths, using the tax-free exemption under federal law. However, since the New Jersey state exemption limit is ($2,000,000 effective January 1, 2017), many married couples only fund the trusts with this amount to avoid New Jersey estate taxes. These exemptions help couples avoid losing half of their assets to federal and New Jersey estate taxes, and they are lost if not used.
Disclaimer trusts: Similar to credit shelter trusts, these trusts allow a surviving spouse to avoid costly federal estate taxes. It is part of a will or revocable trust, and requires that a surviving spouse files a disclaimer and fund the trust within nine months of the first spouse’s death. The estate planning should designate that a disclaimer trust will be funded if the surviving spouse files in the time limit.
Revocable trusts: Sometimes also called a living trust, a revocable trust can be changed during a person’s lifetime and allows the person to plan for their children’s futures. Upon the person’s death, the assets will be distributed to beneficiaries according to the trust.
Irrevocable trusts: These trusts cannot be changed once they are written, and they offer greater tax advantages than revocable trusts. For example, an irrevocable trust can protect life insurance benefits from estate taxes.
Life insurance trusts: These are a type of irrevocable trust that is often used to hold ownership of life insurance policies, which provides further tax benefits. These are often used when an estate with life insurance benefits exceeds the New Jersey estate tax exemption limit. A life insurance trust keeps life insurance proceeds out of the decedent’s estate, protecting them from estate taxes and ensuring they are distributed to the beneficiaries.
QTIP trusts: A Qualified Terminable Interest Property (QTIP) trust allows a person who has remarried and has children from a previous marriage to preserve a child’s inheritance while providing for the new spouse. A QTIP trust allows a spouse to control the ultimate disposition of the trust (who gets the assets after his or her death), as well as take advantage of the tax benefits of the unlimited marital deduction. The QTIP trust provides a way to provide for a new spouse while protecting an inheritance for children from another marriage.
Family limited partnerships: We can help you create a legal entity to hold your business investments and real estate, both to protect these assets from high estate taxes and allow legal transfer to your family members at sizable discounts.
Contact Us To Learn More
To learn more about wills and trusts, or to talk with a skilled lawyer about your estate planning needs, contact the experienced attorneys at D’Alessandro & D’Alessandro, LLC in Basking Ridge. By carefully planning and crafting wills, trusts and other estate planning documents, we strive to help our clients dramatically decrease estate taxes and protect their hard-earned assets for their heirs and beneficiaries.
For more information, visit our estate planning information center .