06 Nov How can I start a trust for my family that doesn’t cost too much?

Q. How can I start a trust for my family that doesn’t cost too much?
— Planning

A. Trusts can be useful estate planning tools, but there are several things to consider.

First, you should speak to an attorney knowledgeable in trusts and estates.

“Trust agreements are legal documents which will govern the ownership of property and by which trustees are appointed and directed to act,” said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park. “For that reason, the terms of the trust are important and need to be carefully considered.”

Moreover, there are a number of different types of trusts, each used for a different purpose, Romania said.

“There is not one form of trust that fits all circumstances,” she said.

For example, she said, some trusts are revocable and used primarily to manage assets and avoid probate but do not result in any creditor protection or tax savings. Other trusts are irrevocable, and transfers to such trusts may, but not always, have income, gift and/or estate tax ramifications, she said.

“Some clients believe transferring assets to a trust for third parties will allow them to qualify for government assistance but if the transfer is within five years of applying for the benefits, penalties will likely be imposed resulting in a period of ineligibility thus negating the objective,” she said. “On the other hand, a properly written special needs trust can be funded during life or at death to permit a child with special needs to receive government benefits.”

Romania said trusts can be written as a part of a will and funded at death. These are called testamentary trusts. Then, inter vivos trusts are prepared as a document separate and apart from the will and generally, but not always, funded during lifetime, Romania said. There are also trusts for the care of an animal and trusts for charitable purposes, which need to have specific terms incorporated in the trust in order to be valid, she said.

“The fee for each of these different trusts will likely vary and can be requested in advance,” she said. “Many times a client’s goals can be accomplished without the need for a trust so that knowing what you want to accomplish and speaking to an individual who practices in the area of estate planning may ultimately save you money.”

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This story was originally published in November 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.