Three Big Mistakes to Avoid When Setting Up an Irrevocable Trust in New Jersey
An irrevocable trust is a type of trust that cannot be changed by the person who created it (the grantor). It is governed by the New Jersey Uniform Trust Code (NJUTC). There are a number of potentially advantages associated with irrevocable trusts, but they must be set up properly. Too many people make avoidable errors. At Poulos LoPiccolo PC, we have extensive experience with revocable trusts. Here, our Monmouth County irrevocable trust attorney highlights the three big mistakes to avoid when setting up an irrevocable trust in New Jersey.
Mistake #1: Not Clearly and Unambiguously Defining the Purpose of the Trust
Setting up an irrevocable trust is a big step. You should not establish one unless you have a strong, clear reason to do so. Further, the purpose of your irrevocable trust should be unambiguous. One of the most common mistakes occurs at the planning stage. An irrevocable trust must serve a clearly defined legal and financial purpose. Some grantors create these trusts for estate tax planning. Others use them for asset protection, Medicaid planning, and/or long-term wealth preservation. It is imperative that the purpose of your trust is well-thought out and clearly defined in the documents.
Mistake #2: Choosing the Wrong Trustee
The trustee is the person (or entity) who is responsible for overseeing the trust. Selecting a trustee is one of the most decisions that you will make when setting up an irrevocable trust. Under New Jersey law, a trustee owes fiduciary duties to the beneficiaries, including duties of loyalty, prudence, and impartiality. If the trustee lacks the experience or judgment to manage trust assets responsibly, disputes and mismanagement may follow. A trustee owes fiduciary duties to the beneficiaries, including duties of loyalty, prudence, and impartiality. Still, it is crucial that you have the right person for the role.
Additional Tip: You need to properly define the authority of the trustee. Ambiguous distribution standards or vague administrative powers can create conflict among beneficiaries and cost other issues.
Mistake #3: Not Properly Funding the Trust
Finally, an irrevocable trust only functions as intended if it is properly funded. Funding means transferring ownership of assets into the trust’s name. Too many grantors complete the trust document but fail to retitle assets or execute the necessary transfer documents. As a result, the trust exists on paper but holds little or no property. In New Jersey, funding an irrevocable trust may require the execution of deeds, the assignment of certain property, updated beneficiary designations, and other things. An experienced New Jersey trust planning lawyer can help.
Call Our New Jersey Irrevocable Trust Lawyer Today
At Poulos LoPiccolo PC, our New Jersey estate planning attorneys have the skills and experience to help clients navigate irrevocable trusts. If you have any questions, we are here as a resource. Please do not hesitate to contact us today for a completely confidential, no obligation case review. With an office in Monmouth County, we handle trust planning throughout New Jersey.
Source:
pub.njleg.gov/bills/2014/AL15/276_.PDF
