What kinds of trusts does New Jersey law recognize?

Express trusts created by a written instrument during life or by will, by the owner's written declaration, or by the written exercise of a power of appointment (N.J.S.A. 3B:31-18); revocable and irrevocable trusts (N.J.S.A. 3B:31-43); spendthrift trusts (N.J.S.A. 3B:31-36); special needs trusts and OBRA '93 trusts (N.J.S.A. 3B:31-37; N.J.S.A. 3B:11-37); discretionary trusts (N.J.S.A. 3B:31-38); charitable trusts (N.J.S.A. 3B:31-22); trusts for the care of an animal and for other noncharitable purposes (N.J.S.A. 3B:31-24; N.J.S.A. 3B:31-25); testamentary trusts, whose trustee obtains letters of trusteeship (N.J.S.A. 3B:11-2); and directed arrangements, with an investment adviser as a fiduciary (N.J.S.A. 3B:31-62).

What is a discretionary trust under New Jersey law?

A trust whose distributions are subject to the trustee's discretion. Notwithstanding the breadth of the discretion — "absolute", "sole" or "uncontrolled" — the trustee exercises it in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries (N.J.S.A. 3B:31-68); a trustee-beneficiary distributes to themself only under an ascertainable standard of health, education, support or maintenance (N.J.S.A. 3B:11-4.1). Whether or not the trust contains a spendthrift provision, a creditor may not compel a distribution that is subject to the trustee's discretion, even under a standard or after an abuse (N.J.S.A. 3B:31-38(a)); whether a creditor can reach a discretionary interest is a question for a licensed New Jersey attorney of your choosing.

Does New Jersey have a directed trust act?

Not as a separate act: New Jersey's law is in the trust code. The trustee acts on a written exercise of a power to direct unless it is contrary to the terms or the trustee knows it would be a breach of the holder's fiduciary duty (N.J.S.A. 3B:31-61(b)); a person with authority over investment decisions is an investment adviser and a fiduciary unless the instrument provides otherwise, a fiduciary who follows the adviser's direction is liable only for its own willful misconduct or gross negligence, and the fiduciary has no duty to monitor the adviser or to warn any beneficiary (N.J.S.A. 3B:31-62).

Types of Trusts in New Jersey

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Common types of Trusts in New Jersey

Revocable living Trust

Created during life and changeable anytime; commonly used to avoid probate and plan for incapacity. You keep control — so it is not asset protection.

Irrevocable Trust

Generally can't be changed or revoked once created; you give up control in exchange for benefits some irrevocable Trusts can offer, such as certain tax or planning goals. Fact-specific — for an attorney to design.

Testamentary Trust

Created by your will and funded only after death, through probate. Useful for leaving assets to minors or in stages.

Special needs (supplemental needs) Trust

Holds assets for a beneficiary with disabilities without disrupting needs-based public benefits like Medicaid or SSI, when properly drafted.

Spendthrift Trust

Includes a spendthrift provision that restrains a beneficiary's ability to transfer their interest and limits some creditors' reach (N.J.S.A. 3B:31-36), within limits.

Charitable Trust

Benefits a charitable purpose; certain forms can combine giving with income or tax planning. Design and compliance are an attorney/advisor matter.

Trust for a pet

A New Jersey trust for the care of an animal alive during the settlor's lifetime, which the Uniform Trust Code provides for (N.J.S.A. 3B:31-24); it ends at the death of the animal or of the last surviving animal it covers, and property not needed for the animal's care goes back to the settlor or the settlor's estate unless the terms say otherwise.

Which type of Trust fits your goals?

Trusts are tools — the right one (if any) depends entirely on your goals, your family, your assets, and tax considerations. This page is general information, not legal advice. A free role check can show you where you stand, and a New Jersey attorney can design what fits your situation.

General information about New Jersey law, not legal advice.

Frequently asked questions

What kinds of trusts does New Jersey law recognize?: Express trusts created by a written instrument during life or by will, by the owner's written declaration, or by the written exercise of a power of appointment (N.J.S.A. 3B:31-18); revocable and irrevocable trusts (N.J.S.A. 3B:31-43); spendthrift trusts (N.J.S.A. 3B:31-36); special needs trusts and OBRA '93 trusts (N.J.S.A. 3B:31-37; N.J.S.A. 3B:11-37); discretionary trusts (N.J.S.A. 3B:31-38); charitable trusts (N.J.S.A. 3B:31-22); trusts for the care of an animal and for other noncharitable purposes (N.J.S.A. 3B:31-24; N.J.S.A. 3B:31-25); testamentary trusts, whose trustee obtains letters of trusteeship (N.J.S.A. 3B:11-2); and directed arrangements, with an investment adviser as a fiduciary (N.J.S.A. 3B:31-62).
What is a discretionary trust under New Jersey law?: A trust whose distributions are subject to the trustee's discretion. Notwithstanding the breadth of the discretion — "absolute", "sole" or "uncontrolled" — the trustee exercises it in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries (N.J.S.A. 3B:31-68); a trustee-beneficiary distributes to themself only under an ascertainable standard of health, education, support or maintenance (N.J.S.A. 3B:11-4.1). Whether or not the trust contains a spendthrift provision, a creditor may not compel a distribution that is subject to the trustee's discretion, even under a standard or after an abuse (N.J.S.A. 3B:31-38(a)); whether a creditor can reach a discretionary interest is a question for a licensed New Jersey attorney of your choosing.
Does New Jersey have a directed trust act?: Not as a separate act: New Jersey's law is in the trust code. The trustee acts on a written exercise of a power to direct unless it is contrary to the terms or the trustee knows it would be a breach of the holder's fiduciary duty (N.J.S.A. 3B:31-61(b)); a person with authority over investment decisions is an investment adviser and a fiduciary unless the instrument provides otherwise, a fiduciary who follows the adviser's direction is liable only for its own willful misconduct or gross negligence, and the fiduciary has no duty to monitor the adviser or to warn any beneficiary (N.J.S.A. 3B:31-62).

General information about New Jersey law, not legal advice.