If you’ve been reading internet articles on New Jersey estate planning, you might come away with the impression that the standard “revocable living trust” (“RLT”) is the solution to all of your problems. However, that’s really only half of the story.
How Revocable Living Trusts Work
In the old days, when someone died with a will, one of their friends or relatives needed to hire a New Jersey lawyer file a complaint in court to “probate” the will. In those days, probate was the process where the court appointed who would be in charge of the affairs of the deceased person and directed that person (the “executor”) on how to act. The executor was required to pay the decedent’s debts and then distribute the remaining assets to any beneficiaries. Before he could do this, however, he needed to make a formal accounting to the court and receive court approval.
That olden-time system resulted in a lot of fees for estate planning attorneys. The executor was often needing to appear in court, and as a result, he needed an attorney to represent him. Somewhere down the line, some clever practitioner came up with a way to avoid having to resort to the court process. The tool to accomplish this was the revocable living trust.
In the simplest scenario, if someone were do die with all of his assets in a revocable living trust, he would have no assets which would need to go through the probate process. The RLT document itself would name a successor trustee at the death of the Grantor, and that person would be permitted to pay the decedent’s debts and distribute assets to the beneficiaries free of court supervision. The revocable living trust would act just like a will, but without having to go through the probate process.
At this point, you’re probably thinking that a revocable living trust sounds great. However, what most internet resources don’t tell you is that the old-time expensive probate system no longer exists in New Jersey, making the old-fashioned type of RLT mostly moot. Let’s debunk a few RLT myths here:
Myth 1: Probate is expensive and long, and revocable living trusts avoid probate.
Unlike in Florida and California, nowadays in New Jersey the probate process is not supervised by the court and is generally inexpensive and efficient. In today’s times, New Jersey probate usually is no more than a quick visit to your local county Surrogate to pay a filing fee of a couple hundred dollars. Unlike in other states, New Jersey probate is no more complicated or expensive than administering a revocable living trust.
Myth 2: Revocable Living Trusts Provide Asset Protection.
RLTs provide no asset protection while you are alive. If you’re sued or you need long term medical or nursing home care, a revocable trust doesn’t help you at all.
Myth 3: Revocable Living Trusts Reduce Taxes.
The traditional form of RLT is tax-neutral.
Does this mean you should proceed with a standard will? Absolutely Not. A standard will (or standard RLT) can leave your loved ones totally unprotected from taxes and divorce (click here to learn more). We offer much better options, namely a highly specialized type of RLT called a Bloodline Trust. Contact us and we can help.