As 2017 comes to a close and 2018 is almost here, many people in New Jersey are making New Year's resolutions. Some people may be aiming to get into shape, save more money or kick a bad habit, like smoking. However, a resolution that many might not initially think of, but is very important in the long-run, is executing an estate plan.
Having an estate plan is important because it puts a person in control -- in control of where their assets will go when they die and in control of who will take care of their medical and financial affairs if they become incapacitated. If a person does not have an estate plan, it is the state who will be making these important decisions, and they may not be to a person's liking.
One estate planning document that many people find useful is a trust. There are numerous types of trusts to choose from, but all of them can explicitly state who will inherit a person's assets and, in some cases, conditions can be placed on a trust. For example, a trust can say a beneficiary cannot inherit until he or she reaches a particular age, or there could be contingencies on how trust assets will be used. In addition, trusts bypass probate, which could save time and money. There may also be tax benefits to creating a trust. Also, a trust shields one's heirs from the creator's creditors.
Certain retirement accounts can be funneled into an IRA trust. A trustee would then be in charge of any withdrawals from the trust, and the property placed in the trust will be protected should a person become insolvent and end up filing for bankruptcy.
That being said, while a person may decide that they want to execute a trust, they may not know how to do so. This is not unusual. According to one source, almost 75 percent of people in the United States had confusion about estate planning. One survey reports that only 17 percent of respondents had executed a trust. Fortunately, attorneys are available to assist those who want to create an estate plan, so that the person's final wishes will be set into place.
Source: CNBC, "How to start thinking about an estate plan," Sharon Epperson, Nov. 21, 2017