Updated January 25, 2024
The New Jersey living trust is a legal instrument that is employed primarily to avoid probate when an estate is divided. The creator of the trust (the Grantor) transfers all of their desired assets and income into the trust and lays out instructions of how these assets are to be handled during their lifetime and how they will be divested should they become incapacitated or die. A living trust is especially useful for people with very large estates because it can enable them to avoid paying estate taxes. If you have complicated business dealings, diverse properties, and multiple accounts, creating a living trust ensures that your affairs will be dealt with properly and according to your wishes if something happens to you.
Laws – Chapter 31 (Uniform Trust Code)
Will (Last Will and Testament) – A “pour-over will” will be employed to provide the divestment of any property and other assets which are not included in your living trust.
Individual Roles
The roles involved in the creation and management of a living trust are as follows:
Grantor (or “Settlor”) – The person who creates the trust and places their assets within it.
Trustee – The person who is in charge of the trust as per instructions laid out in the document.
Successor Trustee – The person who becomes the active Trustee if the Trustee becomes incapacitated. At this point, as per the living trust’s instructions, they will usually be required to divest the Grantor’s estate.
Beneficiaries – The people who are identified as being the inheritors of the assets held in the living trust.
Types
Irrevocable – Has more features than a Revocable Living Trust, but cannot be changed or revoked once it has been created. Avoids probate protects assets from creditors, and, when applicable, avoids estate tax payments.
Revocable – Only allows for the bypassing of probate, but can be changed or revoked.
How to Make a Living Trust in New Jersey
In accordance with § 3B:31-19, a living trust can only be created if the Grantor has the capacity to create one and properly expresses the desire to do so. The Grantor cannot be the sole trustee and/or sole beneficiary of a living trust. The living trust document is drafted, assigning the roles of Trustee, Successor Trustee (in most cases), and Beneficiaries, and listing the assets to be included within the trust. Once signed, the living trust is created, however, it still must be “funded” by putting property into the trust’s name. In order to avoid probate on the divestment of assets, all assets must have their ownership officially transferred over to the trust. It is not mandatory for a notary public to be present during the signing of the document, but it will help protect it from future claims and challenges in court.
Motor Vehicles – All vehicles can be transferred into the trust by using a New Jersey Bill of Sale and transferring the title with the New Jersey DMV.
Real Estate – Real estate will require a New Jersey Deed in order to be put into the trust. This document must be signed in the presence of a Notary Public and filed with your local County Registry of Deeds.
Financial Accounts – To put your various accounts into the trust’s name, you will need to contact your bank to find out the procedure that they employ. In some cases, the bank will require a copy of your living trust. The bank will either change the account into the trust’s name or create a new account for the living trust.
Do I Need a Living Trust?
If you are considering using a living trust in order to bypass the probate process, it is worth noting that your heirs can apply to avoid probate court if you have a small estate. A surviving spouse can avoid estate litigation as long as the estate is valued at $50,000 or less. For other heirs, the estate must be valued at $20,000 or less in order to petition for the direct collection of an estate. In accordance with sections 3B:10-3 and 3B:10-4, your heirs can apply to avoid probate by filling out a New Jersey Small Estate Affidavit. Because New Jersey has adopted the Uniform Probate Code, the probate process in this State is simplified and, therefore, less lengthy and expensive than in States which have not adopted the Code. For this reason, forming a living trust to avoid litigation costs and time may not be the most effective method for you.
If you have a large estate, however, creating an Irrevocable Living Trust is an ideal way for you to protect your assets, avoid paying estate taxes, and have a mechanism in place to properly divest your estate when the need arises.