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Why irrevocable trusts can save money in New Jersey

On Behalf of | Jan 18, 2024 | Estate Planning |

Irrevocable trusts in New Jersey can assist with asset preservation. They help people shield their wealth from various financial threats, including potential creditors and legal claims.

This protective measure can also help more wealth accumulate over the long term.

Federal tax benefits

New Jersey no longer has an estate tax. However, the federal tax may apply to some estates. Assets in irrevocable trusts are typically not in the taxable estate. This can lead to huge tax savings as well as savings in multiple ways with inheritance taxes.

Income tax

Assets in the trust often generate income taxed at lower rates. This is nice for minimizing overall tax liabilities.

Government benefits

Irrevocable trusts can serve as a tool to safeguard government benefits. People may enhance their eligibility for certain means-tested programs. This strategic move helps individuals find a balance between securing their financial future and accessing important government assistance.

However, creating an irrevocable trust is not a decision to make lightly. The grantor cannot easily change or revoke an irrevocable trust. This permanence provides a level of asset protection and tax benefits. However, it limits the grantor’s ability to adapt the trust to changing circumstances, financial needs or evolving family dynamics.

Unlike revocable trusts that allow the grantor to use or retrieve assets during their lifetime, irrevocable trusts may impose restrictions on access. This lack of liquidity may be a concern for some individuals who need flexibility in managing their financial affairs.

Overall, though, irrevocable trusts can offer a comprehensive approach to achieving long-term financial goals.