There are many different types of trusts New Jersey residents can use to protect their financial legacy and limit how much their estate may be taxed. However, it is important that in addition to choosing the right type of trust, they also designate the right person to administer the trusts.
Trusts can be used as safeguards against taxes so that one's heirs are not overly burdened with tax issues when they receive their inheritances. A trust can be used to hold tax-friendly financial assets for many years, including IRAs, life insurance policies and annuities, allowing those assets to grow while taxes are deferred or without being taxed at all. The exact type of tax treatment these assets receive will depend on the type of asset. For example, the distributions from Roth IRAs are tax-free for both the owner and the beneficiary.
Trusts are also efficient tools for making sure that a person's financial legacy will be handled in a certain manner after they have died. The provisions of a trust can stipulate how often distributions will be issued and for how long, establish certain criteria for having the distributions issued or stopped or specify how the assets in the trusts should be used. As long as the provisions stipulated by the grantor are in line with the regulations of the Internal Revenue Service, the grantor can mandate any type of trust distribution schedule and trust structure they deem appropriate for their goals.
An attorney who practices probate and estate administration law may assist clients with incorporating the right types of trusts into their estate plans. The attorney may consider the type of assets a client has and suggest the tax implications for using trusts. Assistance may be provided with creating provisions that dictate the manner in which trust assets should be distributed.