Janet G Lazar LLC : FAQ

Do I need a will?: Probably. A will makes sure your property passes according to your wishes at your death. If you don't have a will, state law determines who gets your assets when you die. Your family may not inherit in the proportions you would have chosen. If you have young children, you should definitely make a will that designates guardians and protects the children's legacies. Most people benefit from making a will even if they do not have children.
What is a trust?: A trust is an entity created to hold property. The person setting up the trust designates one or more individuals or, sometimes, charities to benefit from the property held in the trust. One or more individual or corporate trustees are selected to manage the trust property. You can create a trust during your life by a separate trust agreement or at your death under your will. A trust created during life is sometimes called a "living trust" or "inter vivos trust". A trust created under a will is sometimes called a "testamentary trust". Most trusts are created in order to protect the beneficiaries, in order to save taxes, or for both reasons.
What kinds of trusts are there?: There are many different kinds of trusts. To begin with, a trust can be either "revocable" (meaning that it can be changed or revoked) or "irrevocable" (meaning that it cannot be changed). The person creating a living trust decides whether it is revocable or irrevocable. A testamentary trust is usually revocable during the testator's life and irrevocable after the testator's death. Revocable living trusts are discussed below under the question, "What is a grantor trust?" Other types of trusts include protective trusts, bypass (or "credit shelter") trusts, marital trusts (including "QTIP" and "QDOT" trusts), insurance trusts, minors' trusts (also called "2503(c) trusts"), "Crummey trusts" (called after a man named Crummey), personal residence trusts ("QPRTs"), grantor retained annuity trusts ("GRATs"), charitable split-interest trusts (including "CRUTs"), wholly charitable trusts (such as private foundation trusts), and special needs trusts.
What is a grantor trust?: A grantor trust is a revocable living trust that an individual (the "grantor") sets up for his or her own primary benefit. He or she is usually either the only trustee or a co-trustee with another person. A grantor trust does not save taxes. It is created to facilitate administration of assets during life and smooth the transfer of property at death. For this reason a grantor trust is sometimes called a "housekeeping trust".
Does a grantor trust save estate tax?: No. In most cases, the federal estate tax and the state estate and inheritance taxes are unaffected by the creation of a grantor trust.
Does a grantor trust avoid probate?: A grantor trust rarely avoids probate. Probate is only avoided if every single asset owned by the grantor, without exception, is transferred to the trust when it is created. In any event, probate is not the nightmare it is painted. Particularly in New Jersey, probate is a relatively simple process. Besides, avoiding probate does not avoid most of the administrative and legal work that occurs at death. In most cases, property transfers and estate tax returns are required despite the existence of a grantor trust.
Should I have a grantor trust?: Maybe. A grantor trust should be seriously considered by the following people: those with out-of-state real property; those (such as the elderly) who worry about losing the ability to manage their own assets; and those who expect their relatives to disapprove of their testamentary dispositions (since a trust can sometimes help avoid a probate contest). Other people must weigh the current inconvenience and expense of creating a grantor trust against any possible future benefit.
Do I need estate tax planning?: You should consider estate tax planning if the value of all your property exceeds $675,000 (in New Jersey) or $1,000,000 (in New York). If you are married, you should consider estate tax planning if the combined assets of both spouses exceed these limits. All property should be counted, including real estate, life insurance and pension plans. Note that these limits pertain to state estate tax, which is imposed at a lower rate than federal estate tax. (See below under the question, "Will the estate tax be repealed?")
Will the estate tax be repealed?: Nobody knows. Under the prior law, which expired December 31, 2009, the federal estate tax was much more onerous than the state estate tax, with rates as high as 45%. On the other hand, the federal exemption was higher than the state exemption: $3,500,000 for 2009. The federal estate tax was scheduled to disappear completely for 2010 and then, due to budgetary constraints, reappear at even higher rates in 2011. Conventional wisdom held that Congress would certainly enact a more logical rate structure before the end of 2009. However, that hoped-for change did not occur. Some legislators have predicted that a new federal estate tax law will be enacted in 2010 – and that it will be made retroactive to January 1, 2010. This uncertainty makes estate tax planning difficult but not impossible.