A revocable living trust lets you control your assets during life and pass them at death without probate, while a will passes property through probate at the county Surrogate. In New Jersey, where probate is comparatively streamlined, a living trust is a useful option for some families rather than a necessity for everyone. Irrevocable trusts and trusts created inside a will serve different purposes, from Medicaid planning to holding money for young children.
New Jersey trusts are governed largely by the state's version of the Uniform Trust Code, N.J.S.A. 3B:31-1 et seq.
How is a revocable living trust different from a will?
With a revocable living trust, you transfer assets into the trust, usually serve as your own trustee, and can change or cancel the trust at any time. At your death, a successor trustee you chose distributes or continues to manage the assets under the trust's terms.
Compared with a will, a funded living trust:
- Avoids probate for the assets titled in the trust, including real estate in other states
- Stays private, since a trust is not filed with the Surrogate the way a probated will is
- Plans for incapacity, because your successor trustee can step in to manage trust assets without a court guardianship
What it does not do is just as important. A revocable trust does not shield assets from your own creditors, does not protect them for Medicaid purposes, and does not by itself reduce New Jersey inheritance tax or federal estate tax.
Do I need a living trust to avoid probate in New Jersey?
Often not. In an uncontested New Jersey estate, the Surrogate generally admits the will and appoints the executor without a court hearing, and the fees are modest. Much of the time in estate administration comes from the creditor period, inheritance tax waivers, and selling property, and a trust does not eliminate all of that. Our page on how probate works in New Jersey walks through the steps.
A trust is more likely to be worth it if you own real estate outside New Jersey, have a blended family, want privacy, want a detailed plan for incapacity, or have a beneficiary who should not receive money outright.
Funding matters
A living trust only controls what is actually titled in it. Your home is transferred by a new deed, and accounts are retitled in the trust's name. Assets left outside the trust may still need probate, which is why a trust is paired with a short pour-over will. Funding is also a good time to confirm homeowners insurance, mortgage, and property tax relief programs are not affected.
What does an irrevocable trust do?
An irrevocable trust generally cannot be changed or revoked once signed, except in limited ways the law allows. You give up ownership and control, and in exchange the trust can accomplish things a revocable trust cannot:
- Medicaid and long-term care planning. Assets transferred to a properly structured irrevocable trust can, after Medicaid's five-year look-back period, be excluded from eligibility calculations. Transfers within the look-back period can trigger a penalty, so timing is critical.
- Life insurance trusts. A trust that owns life insurance can keep the proceeds out of a taxable estate for federal purposes and control how they are used.
- Asset protection for beneficiaries. A trust with spendthrift provisions can protect what your children inherit from their creditors and, in many cases, from a divorce.
New Jersey generally does not allow you to place assets in a trust for your own benefit and keep them away from your own creditors, so "asset protection" usually means protecting what you leave to others.
What is a testamentary trust?
A testamentary trust is written into your will and comes into existence only at your death. It goes through probate with the rest of the will, but it lets you control what happens afterward. It is the most common way to provide for minor children: you choose a trustee, describe how money may be used for health, education, and support, and set the ages at which children receive principal. A testamentary trust can also hold an inheritance for a beneficiary with a disability; see special needs trusts. For the will itself, see how to make a valid will in New Jersey.
Talking to a lawyer about your situation
Whether a trust is worth it depends on what you own, where it is, and who you are leaving it to. A good estate planning conversation should leave you knowing whether you need a trust at all, and if so, which kind. Our estate planning guide is a useful place to start.
Gray Law Group is in Jefferson and works with families throughout Morris, Sussex, Warren and Passaic counties and northern New Jersey. If you are weighing a trust against a will, we would be glad to talk it through.
Frequently asked questions
Is a living trust better than a will in New Jersey?
Not automatically. New Jersey probate is comparatively streamlined, so many families do well with a will alone. A living trust tends to earn its cost when you own property in another state, value privacy, want a detailed incapacity plan, or have beneficiaries who should not inherit outright.
Does a revocable trust protect assets from nursing home costs?
No. Because you keep control of a revocable trust, its assets are still treated as yours for Medicaid purposes. Long-term care planning generally involves irrevocable arrangements and is subject to Medicaid's five-year look-back.
Do I still need a will if I have a living trust?
Yes. A short pour-over will catches any assets that were never moved into the trust and sends them to it, and it is where you nominate a guardian for minor children.
Does a trust avoid New Jersey inheritance tax?
A revocable trust does not. Transfers at death through a living trust are treated much like transfers under a will, so the beneficiary's class still determines whether tax is owed.
This website is for informational purposes only and does not constitute legal advice. Prior results do not guarantee a similar outcome.