Janet G Lazar llc
Attorney at Law
Frequently Asked Questions
- 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
- 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
- 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
© Janet G Lazar 2014
All Rights Reserved
Updated May 2014 LAD