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How do testamentary trusts compare to living trusts?

The myriad of trusts out there, such as asset protection trusts, special needs trusts, spendthrift trusts and Totten trusts, can be overwhelming to those in New Jersey who do not have much estate planning knowledge or experience. However, trusts can be broken down into two basic categories that may make them easier to understand.

In general, there are two umbrellas that trusts will fall under: inter vivos trusts and testamentary trusts. In a testamentary trust, the assets are placed in the trust once the creator of the trust passes away.

But, a testamentary trust is not automatic. Instead, it is usually specified as a provision of the person's will. But, because of this, the assets will be subjected to the probate process. Therefore, for example, a person's will would state that once she dies her property should be transferred to the trustee.

An inter vivos trust -- also known as a living trust -- takes effect during the creator's lifetime, and can be written in a way so that it continues after the creator dies. If the entire creator's property is to transfer to the trust upon the creator's death, it will not be subject to the probate process. Living trusts can be made revocable, meaning that the creator of the trust can alter the trust terms, or they can be made irrevocable, which cannot be changed.

This is only a brief overview of trusts in New Jersey. There are many specific types of trusts that fall under these categories. Those in New Jersey who are contemplating creating a trust should make sure they understand all their options before proceeding.

Source:, "Trusts: An Overview," accessed on Dec. 3, 2016

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