Do You Need an Attorney in the Creation of a
Trust in New Jersey? We Can Help.
If you need advice on any type of trust in NJ and its use in estate planning and asset protection, including the use of trusts in a will or in avoiding New Jersey probate, and want to talk to an experienced and easily-approachable attorney, then call Fredrick P.
Niemann toll-free at (855) 376-5291 or e-mail him at firstname.lastname@example.org. He warmly welcomes your inquiries.
A properly written trust can be a tremendous tool to help your family and loved ones avoid the many possible complications, problems and costs associated with estate administration and probate in New Jersey. With a trust, you can avoid having to obtain tax waivers to transfer ownership of assets and property both in New Jersey and other states. A trust avoids the need for probate. This is a definite advantage in New Jersey and other states.
INTRODUCTION TO NEW JERSEY TRUSTS
Trusts can be used for a variety of purposes. If you want to reduce potential federal estate tax and New Jersey death tax liability, this objective can be achieved with a combination of various trusts. Perhaps you want to provide income from a trust to a charity. In this case, an income trust can accomplish this purpose. Maybe you’re concerned that a beneficiary cannot responsibly control money or is improvident and cannot manage money wisely. In this example, you can create and structure a trust in a way that the beneficiary cannot transfer his or her interest in the income or principle of the trust and the beneficiary’s creditors cannot reach the trust or the income produced by the trust. Further, the beneficiary cannot demand the payment of any trust principle to him or her without the trustee’s consent.
If you want to have professional management of trust assets because your spouse and/or other family members have little professional investment or business experience, the use of a trust can assure that someone with professional asset management experience can serve in that capacity.
Maybe you want to provide income to one or more beneficiaries but you are not able at present to determine whether the beneficiary actually needs the income or what the tax liability will be. If so, then you can use a trust in which the trustee has the discretion to distribute income and or trust corpus to the beneficiaries. Since the income needs of the beneficiary are subject to change, the trustee may be in a better position to determine the actual needs of the beneficiary instead of you, especially if you are deceased. The trustee can then distribute income as it is needed and in such a way that it is the least detrimental to the beneficiary.
If you want to assist a family member who has suffered a disability through an accident or who has been disabled since birth or childhood (e.g., a developmental disability), a trust can be used to enable the disabled beneficiary to receive public assistance in such a way that it does not disqualify the disabled person from receiving public assistance benefits like, Medicaid, Medicare, or other forms of supplemental assistance. A trust, if properly structured, can achieve these objectives.
In short, you can create and use a trust in New Jersey for anything you want to accomplish as long as it does not violate New Jersey law and is not considered to be in violation of public policy. For example, a trust that has been established solely for the purpose of carrying on an illegal business or solely for the purpose of defrauding creditors is an example of an illegal trust. Similarly, a charitable trust that violates some provision of the tax laws is an illegal trust if the effect of the trust is to promote an unlawful purpose. Likewise, a trust that that requires the trustee to perform criminal or negligent acts, or a trust that would require the beneficiaries to commit negligent or criminal acts as a condition for receiving income or trust principle is an illegal trust. If a trust is considered illegal it will not be enforced.
Fredrick P. Niemann, Esq. spoke on Alzheimer’s Disease, a complimentary symposium for caregivers and family members presented by Alcoeur Gardens and The Memory Enhancement Center on Thursday, March 6th. Topics covered were memory loss conditions, caregivers tips and strategies, current treatment modalities including new research medications, support networking, VA benefits and how to preserve your assets.
Fredrick P. Niemann, Esq. was recently the featured speaker in Colts Neck, NJ at a seminar entitled Investments & Estate Planning for Trusts and Wills for High Net Worth Individuals. He spoke on the current state of federal and NJ tax laws and how to protect family assets from catastrophic illness.
HOW A TRUST WORKS AND THE BASIC TRUST TERMS YOU NEED TO KNOW
A NJ trust is a fiduciary relationship in which property is transferred to a trustee for the benefit of someone else. The person creating and funding the trust is generally called a settlor, trust maker, or grantor. The grantor typically executes a trust document and transfers property to a person called a trustee. The trustee is responsible for administering the trust. The person for whose benefit the trust was created is called a beneficiary. The property held in trust is often called trust corpus.
New Jersey statutes and case law controls the creation, operation, and termination of a trust. The trust can generally be written any way you choose except it cannot have a term that is illegal or against public policy. Generally, where a trust fails to address an issue, New Jersey case law must be examined.
A trust may provide for the management of property, the distribution of income to beneficiaries, the distribution of corpus to beneficiaries, and other powers. In addition, there are many potential estate tax implications involving the creation and administration of a trust. For example, when property is transferred to, from, or within a trust there may be a gift tax due.
Trusts within a will and which come to life when a person dies are called testamentary trusts and are subject to probate at the grantor’s death. In the case of a testamentary trust, the grantor must have legal capacity at the time the document was executed. Capacity generally means the maker of the trust is of legal age (18 years in New Jersey), and understands the extent of his/her property, the beneficiaries who will benefit from the trust, and the transfer of his/her property being made.
On the other hand, a trust created during lifetime (called a “living trust”) is generally not subject to probate. A grantor must have the legal capacity to create a living trust. Capacity refers generally to the grantor being of sound mind and legal age when he or she creates and/or signs the trust document. A trust may be void or voidable if the grantor lacks capacity at the time the trust is created.
There can be more than one grantor of a trust. For example, more than one individual can transfer their separately owned property to a common trust. Also, jointly owned property and community property with multiple owners can each generally transfer his or her interest in the property to a NJ trust.
WHAT TERMS MUST A TRUST DOCUMENT CONTAIN
New Jersey law requires that a trust be a written document. The trust must also appoint a trustee. For a trust to function, it needs to be funded with cash or other property of value.
TRUSTEE RESPONSIBILITIES UNDER A NEW JERSEY TRUST
The trustee receives legal title to the property owned by the trust and is responsible for administering the terms of the trust for the benefit of the beneficiaries of the trust. The trust document should identify the trustee and provide for successor trustees in case a trustee is unable to serve as trustee in the future. The trust can specifically name the trustee or provide for selection or replacement of a trustee.
A trust may have more than one trustee. Where there is more than one trustee, these trustees are often called co-trustees. The trust document can specify whether a majority or all of the trustees must agree on decisions to be made by the trustee.
There are two general types of trustees: individual trustees and corporate trustees. Any combination of individual and corporate trustees can be used, but should be carefully considered.
Individual trustees generally include (1) the person creating the trustee, or (2) his or her family members, or (3) friends.
One can have a corporate trustee. Corporate trustees include trust companies and banks and other financial institutions with trust services. Corporate trustees are usually chosen for their expertise with trusts and because a corporate trustee will (hopefully) always be there. Corporate trustees charge for their services, often based upon the amount of trust assets
The trustee has an important responsibility to all beneficiaries of the trust. Unless expressly waived under the terms of the trust, the trustee is responsible for complying with the Prudent Investor Act. This law requires that the trustee invest the trust assets prudently for the benefit of all the beneficiaries.
Another law in New Jersey, which the trustee must comply with unless waived in the trust agreement is the Principal and Income Act. Under this law, certain items are designated as income and other items are designated as principal. This affects the taxes owned by the trust or its beneficiaries. Periodic accountings must be rendered by the trustee and they must comply with the Principal and Income Act.
In addition to these two laws, the trustee must file tax returns. These include federal and state 1041’s, which are income tax returns for the trust and K-1’s, which are given to beneficiaries to indicate income distributions.
In the administration of a NJ estate, a trustee of a trust created under a will or probate estate must be careful not to take on liability for acts not properly done by the executor. An executor, an administrator and a trustee have personal liability to taxing authorities and to all of the beneficiaries of an estate. A good faith effort by the fiduciary to be fair and reasonable will not protect the fiduciary from this liability. Serving as fiduciary is a complex undertaking, which should not be attempted without professional assistance.
WHAT KIND OF PROPERTY CAN BE TRANSFERRED TO A TRUST
Virtually any kind of property can be placed in a trust, including real estate, bank accounts, stocks, bonds and even IRA’s and qualified retirement plans. Other examples of property that can be transferred to a trust include a personal residence or investment real estate, a closely-held business, CD’s, investments such as stocks and bonds, life insurance, or even cash.
Property transferred to a trust should follow the formality required for the type of property being transferred. For example: A transfer of real estate requires a deed to be filed at the County Clerk’s Office in the county of NJ where the real estate is located. A transfer of an automobile requires a formal transfer of title at the NJ Department of Motor Vehicles. A transfer of an insurance policy or an annuity may require a change of ownership form to be filed with the insurance company.
WHAT ABOUT BENEFICIARIES UNDER A TRUST? HOW ARE THEY PROTECTED?
A trust must have one or more beneficiaries. A beneficiary may be either a specified person, a member of some clearly identifiable class of persons (like your children, grandchildren, or related family members or close friends), a charity, or an ascertainable entity (ie., fishing or garden club, your pet, a museum).
A trust beneficiary of a trust is entitled to receive property (whether income or corpus) from the trust as specified in the terms of the trust document.
An income interest in a trust is an interest in which a beneficiary receives distributions of income earned by a trust.
Income which is not distributed annually is accumulated. The trust document can provide for the disposition of accumulated income.
If the beneficiary of a trust dies after the trust is created, the trust document can control what happens to trust property in that event.
TERMINATION OF A TRUST UNDER NEW JERSEY LAW
A trust generally terminates when the terms of the trust dictate it be terminated and/or when the trustee has the power to terminate the trust and exercises this power. Upon termination, the trustee will distribute the trust property to the beneficiaries (or the grantor in the case of a revocation), and the trust will end.
Here’s a Brief Questionnaire to Decide if You Need or Want a Trust in New Jersey
- Do you want your minor/adult children to be the co-owners of your estate with your surviving spouse?
- Do you want your children by a previous marriage to be disinherited by your present spouse after you die?
- Do you want to potentially pay more in federal and New Jersey death and inheritance taxes?
- Do you want in-laws, family and/or friends filing lawsuits over the custody of your children?
If your answer(s) to any of these questions is no, then you need to contact NJ trust attorney, Fredrick P. Niemann, Esq. as soon as possible!
The attorneys with Fredrick P. Niemann, Esq. have prepared trusts, wills, health care directives (living wills), powers of attorney and numerous other estate/family and business planning documents for individuals and families like yours for over 30 years.
OFFICE OF CONTINUING EDUCATION WORKSHOPS
Rutgers State University is pleased to invite Mr. Fred Niemann of Hanlon Niemann to be the guest speaker at their workshops for the Office of Continuing Education.
Mr. Niemann will offer continuing Education courses on “Elder Abuse and Financial Exploitation”, “Hidden Secrets of Veterans Benefits”, “Veterans Aid and Attendance Benefits 2013″, “Medicaid Changes: The Approaching Storm”, and the “New NJ Comprehensive Waiver Demonstration”.
Click here to check our website for current dates for these events.
Fredrick P. Niemann, Esq. was recently asked to speak at the NJ State Bar Association Institute of Continuing Legal Education in New Brunswick, NJ on the essentials of estate planning.
Mr. Niemann addressed attorneys from throughout the state of NJ interested in learning key concepts and principals of NJ estate planning, including such topics as wills, trusts, estate taxations, asset protection, powers of attorney, health care directives, special needs and supplemental needs trusts for disabled and incapacitated individuals, avoiding probate through creative use of beneficiary planning, inheritance taxes, gifting and changes coming to federal estate taxation.
Fredrick P. Niemann, Esq. attended the 46th annual Heckerling Institute on Estate Planning Conference from January 9th to January 13th at the Orlando World Center sponsored by the Community of Miami School of Law. This week long session assembled the nation’s leading authorities to lecture and discuss the latest in estate planning techniques and strategies. Topics analyzed and discussed included 1) elder law; 2) asset protection; 3) statutory case law developments; 4) planning with financial assets including annuities, Roth IRA’s, and life insurance policies; 5) litigation and tax controversies; 6) networking and practice development.
Mr. Niemann was quoted in an article in the Asbury Park Press which discusses
Last Wills and Testaments. A copy of the article can be found here.
Fredrick P. Niemann, Esq. was invited by the Office of Elder Rights and Adult Protective Services of the Department of Health and Senior Services, Division of Aging and Community Services, to make comments on existing Adult Protective Services Programs on August 25, 2010 at the State Capitol located in Trenton, New Jersey.
On March 6th, Fredrick P. Niemann, Esq. addressed the Monmouth County NJ Bar Association Family Law Committee on Special Needs Trusts, Supplemental Needs Trusts for adult and minor incapacitated children and aged parents and their use in asset planning and eligibility for government benefit programs, including Medicaid, SSI and SSD.
The attorneys with Fredrick P. Niemann, Esq. and Hanlon Niemann have prepared trusts, wills, health care directives (living wills), powers of attorney and numerous other estate/family and business planning documents for individuals and families like yours for over 30 years.