A revocable trust is a powerful estate planning tool that offers flexibility, privacy, and ease of asset management during life and after death. In New Jersey, many individuals opt for revocable trusts to avoid probate, plan for incapacity, and maintain control over their assets. However, revocable trusts typically work in conjunction with a pour-over will, and probate may not always be avoided entirely. This guide explains the purpose, benefits, and process of establishing a revocable trust in New Jersey.

What Is a Revocable Trust?

A revocable trust, also called a living trust, is a legal entity created by a settlor (the person establishing the trust) to hold and manage assets during their lifetime. The settlor typically serves as the initial trustee, retaining full control over the trust assets.

The unique feature of a revocable trust is that it can be modified or revoked at any time during the settlor's lifetime. Upon the settlor's death, the trust becomes irrevocable, and a successor trustee assumes responsibility for distributing assets according to the trust's terms.

The Role of a Pour-Over Will

A revocable trust is often used in conjunction with a pour-over will. This type of will directs that any assets not already transferred into the trust during the settlor's lifetime be transferred upon their death.

Because some assets may remain outside of the trust—either by oversight or due to title restrictions—having a pour-over will ensures that those assets are still distributed according to the trust's terms. However, assets passing through the pour-over will must go through probate, meaning that probate may not be entirely avoided.

Advantages of a Revocable Trust in New Jersey

1. Minimizing Probate

One of the primary reasons New Jersey residents create revocable trusts is to reduce the impact of probate, the court-supervised process of administering an estate. Probate can be time-consuming, expensive, and public. By placing assets into a revocable trust, they pass directly to beneficiaries without probate delays. However, if any assets remain outside the trust at the time of death, probate may still be necessary.

2. Privacy Protection

Unlike a will, which becomes part of the public record during probate, a revocable trust remains private. This ensures that the details of the estate, including asset distribution and beneficiary information, are not disclosed to the public.

3. Planning for Incapacity

A properly funded revocable trust allows a successor trustee to step in and manage assets if the settlor becomes incapacitated, eliminating the need for a court-appointed guardian or conservator.

4. Efficient Asset Distribution

Because a revocable trust operates outside of probate (for assets properly titled in the trust), beneficiaries can receive their inheritance quickly and efficiently without waiting for court proceedings.

5. Flexibility and Control

Since the settlor retains full control during their lifetime, they can make changes, add or remove assets, and adjust beneficiary designations as circumstances change.

Funding a Revocable Trust

A revocable trust is only effective if it is properly funded. This means that assets must be transferred into the trust's name. Common types of assets transferred into a revocable trust include:

• Real estate: Requires a deed transfer.
• Bank accounts: Can be retitled in the name of the trust or designated as payable-on-death (POD).
• Securities and investments: Must be re-registered or transferred through brokerage firms.
• Business interests: Some closely held business interests may require additional steps.
• Tangible personal property: Can be transferred via an assignment of property.

Failure to fund a revocable trust properly can result in assets still being subject to probate, negating one of the primary advantages of having a trust.

Disadvantages of a Revocable Trust

While revocable trusts offer numerous benefits, they are not without drawbacks:

• Upfront costs: Drafting and funding a trust can be more expensive than preparing a traditional will.
• Ongoing management: Assets must be properly transferred and maintained in the trust.
• Probate may still be necessary: If assets are not properly transferred, they may still need to go through probate under a pour-over will.
• Limited creditor protection: Because the settlor retains control, the assets remain accessible to creditors.

Who Should Consider a Revocable Trust?

A revocable trust may be beneficial for individuals who:

• Own real estate in multiple states and want to avoid ancillary probate.
• Desire privacy in their estate planning.
• Want smooth asset management in case of incapacity.
• Prefer to streamline inheritance for their heirs.

Final Thoughts

A revocable trust can be an essential part of a New Jersey estate plan, offering flexibility, privacy, and efficiency in asset management. However, it is crucial to properly establish and fund the trust to maximize its benefits. Additionally, because probate may still be required for some assets, working with an experienced estate planning attorney is essential.

If you are considering a revocable trust or need assistance with estate planning, I am here to help.  

📞 Call or text me at 201-466-2641 today to schedule your personalized consultation. 

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