Latest / BSPE Legal Marketing Podcast / What Are the Advantages and Disadvantages of a Testamentary Trust in New Jersey? - Christine Matus

Transcript

What Are the Advantages and Disadvantages of a Testamentary Trust in New Jersey? - Christine Matus · BSPE Legal Marketing Podcast

• 0:00
  SPEAKER_00: What are the advantages and disadvantages of a testamentary trust in New Jersey?
• 0:05
  SPEAKER_00: When you pass away, the question of how your loved ones receive their inheritance can mean the difference between financial security and financial chaos.
• 0:13
  SPEAKER_00: A testamentary trust is a powerful planning tool created through your last will and testament that only comes into existence after your death once your will is accepted through the probate process.
• 0:24
  SPEAKER_00: Unlike a revocable living trust that is funded and active during your lifetime, a testamentary trust holds no property and has no trustee with authority to act until after you are gone.
• 0:34
  SPEAKER_00: Under New Jersey law, specifically NJSA 3B 31 to 18, a trust may be created by a transfer of property through a will, taking effect at the settler's death, provided the will itself is valid and properly signed and witnessed.
• 0:49
  SPEAKER_00: One of the greatest advantages of a testamentary trust is the control it gives you over how and when your beneficiaries receive their inheritance, rather than handing over a lump sum all at once.
• 1:00
  SPEAKER_00: Parents of minor children can direct a trustee to pay for tuition, housing, or medical costs, and release remaining funds only when the child reaches an age they choose.
• 1:09
  SPEAKER_00: For families supporting a child or adult with disabilities, a testamentary trust can provide financial security while preserving eligibility for government benefits that depend on asset limits.
• 1:20
  SPEAKER_00: New Jersey law also recognizes spendthrift provisions under NJSA 3B 31-36, which can restrict a beneficiary from transferring their interest and may limit what creditors are able to reach.
• 1:33
  SPEAKER_00: However, a testamentary trust does come with meaningful drawbacks that every family should understand before deciding whether this approach is right for them.
• 1:42
  SPEAKER_00: Because the trust is embedded in your will, it must pass through probate before it can be funded, which means the trust terms become part of the public record rather than staying private.
• 1:51
  SPEAKER_00: A revocable living trust, by contrast, typically allows assets to pass outside of probate entirely and keeps the trust document out of the public eye.
• 2:00
  SPEAKER_00: Testamentary trusts also create ongoing trusty responsibilities and administration costs that continue for as long as the trust remains active, potentially for many years.
• 2:10
  SPEAKER_00: On the tax side, trust income tax brackets are far more compressed than individual brackets, meaning a trust that accumulates income rather than distributing it can face a significantly higher tax burden.
• 2:22
  SPEAKER_00: One of the biggest risks to avoid is leaving unclear or incomplete instructions in your will.
• 2:28
  SPEAKER_00: Because once you are gone, there is no opportunity to explain or correct ambiguous terms.
• 2:33
  SPEAKER_00: A knowledgeable lawyer can help ensure your testamentary trust is drafted with the precision needed to carry out your wishes without costly disputes or court intervention later.
• 2:42
  SPEAKER_00: The right attorney for your family will take the time to understand your specific circumstances, your beneficiaries' needs, and whether a testamentary trust or another planning structure serves you best.
• 2:53
  SPEAKER_00: Mattis Law Group has helped families across Ocean County and throughout New Jersey navigate wills, trusts, probate, and special needs planning with care and clarity.
• 3:02
  SPEAKER_00: Contact MADIS Law Group, located at 81 East Water Street 2C, Toms River, New Jersey, 08753, United States, by calling 732 281 0060 to schedule your consultation with a trusted law firm today.