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Trusts 101: Understanding the basics of trusts

Trusts can form the backbone of a well-rounded estate plan for many people in New Jersey. Not only can they serve as a vehicle for handing your assets down to your loved ones after you die, but conditions can also be placed on trusts. Therefore, it is a good idea to have a basic understanding of trusts.

In general, trusts fall under one of two types. Testamentary trusts are made a part of a person's will, and only go into effect once the person passes away. Living trusts, on the other hand, are set up while a person is still alive.

There are "revocable" living trusts and "irrevocable" living trusts. Revocable living trusts let the creator of the trust stay in control of the assets placed in the trust. This means they can alter the language of the trust or even revoke it entirely. In irrevocable trusts, however, the creator of the trust relinquishes control of the assets and, absent the permission of the beneficiary to the trust, the language of the trust cannot be altered.

There are also many specific types of trusts that can be used to achieve different purposes. For example, a generation-skipping trust lets a person pass down assets without being subject to taxes to beneficiaries two or more generations below them (for example, their grandchildren.)

In the end, many people can benefit from executing a trust. However, the world of trusts is complex, and there are as many varieties out there as there are different needs and purposes. In order to ensure that your trust meets your specific needs, it can help to work with an estate planning attorney.

Source: CNN Money, "Ultimate guide to retirement," Accessed July 16, 2017

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