Why some persons create Trusts in addition to Wills
Probate is defined as the procedure by which an Executor proceeds to admit a Will to the jurisdiction of the Surrogate Court, which is proved to be valid or invalid. The term generally includes all matters relating to the administration of estates.
New Jersey is a probate easy state. Very few persons in NJ really need a $4,000 Revocable or Irrevocable Trust for their estate. For most NJ citizen, a $500 Will is best for them.
There are instances where Surrogate Court monitoring of the estate is desirable. Much has been written about the disadvantages of probate.
Following are just a few of the problems associated with probate.
With a Will only, you can’t act until you receive Surrogate or Court approval
Sometimes-Time Consuming
The probate of an estate may take several months to several years to complete. During that time family members may have to apply to the Surrogate Court for an allowance.
Lack Of Privacy
Documents filed with the Surrogate Court are public information. They are available for inspection to anyone who asks. In large estates, which require an accounting, your probate file will contain a complete list of all assets devised by your Will including business assets. This lack of privacy may lead to problems among family members who now know the plan of distribution and may then contest any provisions with which they disagree. Disinherited relatives and creditors are notified and given time by the Court to contest the Will distribution.
WHY SOME PEOPLE SPEND OVER $3,500 TO CREATE REVOCABLE LIVING TRUSTS
Fragmentation - Real Estate
If you own real property in more than one state, probate rules must be followed in each state in which real property is located. The cost and time may be increased.
A Revocable Living Trust is a legal device that allows you to maintain complete control over your assets and AVOIDS PROBATE. Because there is no probate of a Living Trust, your private financial matters remain private; there are no probate costs, no long delays and loss of control, and no fragmentation of the estate. However, there is no Medicaid benefit or tax benefit with a revocable trust
You Maintain Complete Control Over Your Property In Trust If Revocable
The principle behind a Revocable Living Trust is simple. When you establish a Living Trust, you transfer all your property into the Trust, and then name yourself as trustee, or you can name you and your spouse as co-trustees of the Trust.
The trustees maintain complete control over the property, the same control you had before your property was placed in trust You can buy, sell, borrow, pledge, or collateralize the trust property. You can even discontinue the Trust if you choose. That is why it is called a "Revocable" Living Trust. We will explain the "Irrevocable Trust" at the end of the article.
Transferring Property Into The Trust
Anywhere you have assets, you will need help in transferring your property into the Trust. Your attorney, securities investor, etc., will provide you with assistance needed to transfer your property into your Revocable Living Trust. Your attorney will need to prepare new deeds, affidavit of title and other legal documents to transfer ownership of real estate in NJ.
Complete Privacy
Probate records are public; your Revocable Trust documents are private. A Revocable Living Trust will safeguard the privacy of your family and your private financial matters.
Naming A Trustee
Most people name themselves and their spouse as the initial Trustees of their Trust. This is usually true unless one spouse is incapacitated to the point that he or she is not able to manage your assets in the same way you do now.
Gifts To Religious And Charitable Organizations
Many people wish to give a portion or sometimes all of their assets to a religious or charitable organization in order to carry on the work of those organizations that have given them comfort or peace of mind during their lifetimes. This is easily accomplished with a Revocable Living Trust.
Marital Tax Deductions
A Revocable Living Trust can easily be structured to automatically create separate Trusts upon the death of either your spouse. Here's how it works. If the wife dies first, the husband has total control of his Trust. Also, for the remainder of his life, he receives all income from her Trust and has the use of the assets whenever needed for living expenses. When he dies, each Trust will claim its tax exemption, and over $11.5 million will go tax-free under Federal Law to their children, or any other beneficiary they designate, without having to go through probate.
Why a Trust may not be best for you
- The attorney will often charge $3,000 for each trust [$6,000 for husband and wife]
-There is administrative work to fund the trust. Your attorney and you need to contact banks, investment companies, and other entities holding your assets to have them re titled
Real estate needs to be re titled. Your attorney will need to Prepare a new Deed computer, setting forth Property location - type street, city/town, state, zip.
-Insert in new deed current owner’s name
-Type New Owners name/s.,
-Type in prior Book # page #
-Type in the date the sellers purchased property.
-Type in- Municipal Lot and Block.
-Type in other necessary information in Deed.
Attorney must Prepare Affidavit of Title- Insert where seller will live after Deed.
Attorney must Prepare Affidavit of Partial Exemption.
Attorney must Prepare 1099 for no capital gains tax
Attorney must Prepare Seller's Residency Certification/Exemption
Attorney must Prepare correspondence to County Clerk. [Note- You must pay the mandatory fees to the county Clerks' office, and deliver the Deed and papers to the Clerk's office
Plus if you have a mortgage the mortgage company may charge you a higher interest rate if you want to transfer assets into a trust
Other assets may need to be re titled
- You are no longer the owner of the property.
- A revocable trust does not protect assets. It usually only avoids probate
- if you set up an Irrevocable trust to try to hid/ protect assets from nursing home, you cant be the trustee and cant undo the trust
Probate is easy in New Jersey. Most people in NJ do not need a $3,000 trust. We usually inquire of persons who want a trust: “Why do they think they need a trust?’ It has to be more than- Susie Orman on trust said to get a trust, or “their friend in Florida has one"
What happens if you do nothing
If You Have No Will or Trust:
If you leave no Will or your Will is declared invalid because it was improperly prepared or is not admissible to probate:
1. The procedure to distribute assets becomes more complicated. It will require all of the children to select someone to be the Administrator, then all the children to sign a Renunciation Affidavit in front of a notary. If all the children do not sign the Renunciation Affidavit if front of notaries, then a Complaint and Order with have to be filed in the Superior Court. Cost over $3,000. The preparation of a Will for under $400 eliminates these costs.
2. Additional expenses will be incurred and extra work will be required to qualify an administrator-Surety Bond, additional costs often over $1,000 and extra legal fees
3. State law determines who gets assets, not you. People who dislike you or don’t care about you can get your assets
4. If you have no spouse or close relatives the State may take your property. Most people who rather have charities or friends get their money.
5. It often causes fights and stress within your family and sometimes lawsuits
6. If there are minor children a Judge determines who gets custody of grand children
7. You lose the opportunity to reduce State inheritance taxes and Federal estate taxes without improper planning
When loved ones are grieving and dealing with death, they shouldn’t be overwhelmed with Financial concerns and estate problems if there is no Will or not prepared or signed properly.
Who don’t you want to receive your assets?
Who is not the best choice to raise your children, or safeguard your children's money for college? Do you want children, or grandchildren, to get money when they turn 18? Will they invest money wisely, or go to Seaside and play games?
Beware of online documents not prepared by an attorney. Never use a form on line. No one tries to do their own electrical work on their home anymore or change their own oil. Have a professional do it right.
Make sure it is a Self-proving Will and says no bond required.
THE FOLLOWING IS A SAMPLE OF A VARIETY OF CLAUSES AND ITEMS WHICH SHOULD BE INCLUDED IN A WILL:
1ST: DEBTS AND TAXES
2ND: SPECIFIC BEQUESTS
3RD: DISPOSITION TO SPOUSE
4TH: DISPOSITION OF REMAINDER OF ESTATE
5TH: CREATION OF TRUSTS FOR SPOUSE
6TH: CREATION OF TRUST FOR CHILDREN
7TH: OTHER BENEFICIARIES UNDER 21
8TH: EXECUTORS
9TH: TRUSTEES
10TH: GUARDIANS
11TH: SURETY OR BOND
12TH: POWERS
13TH: AFTERBORN CHILDREN
14TH: PRINCIPAL AND INCOME
15TH: NO ASSIGNMENT OF BEQUESTS
16TH: GENDER
17TH: CONSTRUCTION OF WILL
18TH: NO CONTEST CLAUSE
A will must not only be prepared within the legal requirements of the New Jersey Statutes but should also be prepared so it leaves no questions regarding your intentions.
WHY PERIODIC REVIEW IS ESSENTIAL
Even if you have an existing Will, there are many events that occur which may necessitate changes in your Will. Some of these are:
* Marriage, death, birth, divorce or separation affecting either you or anyone named in your Will
* Significant changes in the value of your total assets or in any particular assets, which you own
* A change in your domicile
* Death or incapacity of a beneficiary, or death, incapacity or change in residence of a named executor, trustee or guardian of infants, or of one of the witnesses to the execution of the Will
* Annual changes in tax law
* Changes in who you like
MAY I CHANGE MY WILL?
Yes. A Will may be modified, added to, or entirely changed at any time before your death provided you are mentally and physically competent and desire to change your Will. You should consider revising your Will whenever there are changes in the size of your estate. For example, when your children are young, you may think it best to have a trust for them so they do not come into absolute ownership of property until they are mature. Beware; if you draw lines through items, erase or write over, or add notations to the original Will, it can be destroyed as a legal document. Either a new Will should be legally prepared or a codicil signed to legally change portions of the Will.
Call the Law Office of Kenneth Vercammen at 732-572-0500 to schedule an in-office consultation.
Kenneth Vercammen & Associates
Attorney at Law
2053 Woodbridge Ave
Edison, NJ 08817
Kenneth Vercammen, Esq.– Probate, Estate Planning & Elder Law
Kenneth Vercammen is an attorney in Edison, NJ. He is Chair of the ABA Probate & Estate Planning Law Committee of the American Bar Association Solo Small Firm Division. He is the author of the ABA book “Wills and Estate Administration”
He is a speaker for the NJ State Bar Association at the annual Nuts & Bolts of Elder Law & Estate Administration program. He is admitted to the Supreme Court of the United States.
He was Editor of the ABA Estate Planning Probate Committee Newsletter. Mr. Vercammen has published over 150 legal articles in national and New Jersey publications on Wills, litigation, estates, probate law and trial topics.
He is a highly regarded lecturer on litigation and probate law for the American Bar Association, NJ ICLE, NJ State Bar Association and Middlesex County Bar Association. His articles have been published in noted publications included New Jersey Law Journal, ABA Law Practice Management Magazine, and New Jersey Lawyer. He established the NJlaws website www.njlaws.comwhich includes many articles on Estate Planning, Probate and Wills.
Ken’s ABA book Wills and Estate Administration” is available at
http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=224827061
