If you’re planning your estate in New Jersey, you’ve probably heard that you need a will. You may also have heard that a living trust is better. The truth is, it depends, and for many New Jersey families, the answer is both.
This article breaks down the real differences between a living trust and a will, when each one makes sense, and one dimension most estate planning guides leave out entirely: how your choice affects Medicaid eligibility and long-term care planning down the road.
What is a Living Trust and How Does it Work?
A living trust, specifically a revocable living trust, is a legal arrangement where you transfer ownership of your assets into the trust during your lifetime. You serve as your own trustee and keep full control. You can change the terms, add or remove assets, or dissolve the trust entirely at any point.
When you die, assets held in the trust pass directly to your beneficiaries. No probate, no court involvement, no public record. Your successor trustee, whoever you’ve named to step in after you, distributes everything according to the trust’s terms.
Key features of a living trust:
- Control: As both grantor and trustee, you manage the trust’s assets throughout your lifetime. You can modify or revoke it at any time.
- Probate avoidance: Assets in the trust transfer directly to beneficiaries at your death, bypassing the court process entirely.
- Incapacity planning: If you become unable to manage your own affairs, your successor trustee steps in immediately, no court involvement required.
Understanding Wills in Estate Planning
A will is a legal document that spells out how you want your assets distributed after you die. You name beneficiaries, appoint an executor to carry out your wishes, and can designate guardians for minor children.
What a will doesn’t do is avoid probate. In New Jersey, any assets titled in your name alone that pass through a will must go through the probate process, court supervision of the estate before assets reach your beneficiaries. Probate typically takes nine to twelve months. During that time, your assets are tied up and unavailable to your family. The process is also public, meaning anyone can look up the details of your estate.
A few things worth knowing about wills in New Jersey:
- Your will must be signed in front of two witnesses to be legally valid. Notarization is not required.
- If you own real estate in multiple states, your executor may need to open a separate probate proceeding in each state.
- Wills can be contested in court, which can delay distributions and create family conflict.
A will is still a foundational document. Even if you have a trust, you’ll want a “pour-over” will to catch any assets that weren’t transferred into the trust during your lifetime.
Living Trust vs. Will: Side-by-Side
| Will | Revocable living trust | |
| Avoids probate | No | Yes |
| Stays private | No | Yes |
| Takes effect during incapacity | No | Yes |
| Harder to contest | No | Yes |
| Cost to create | Lower | Higher |
| Requires asset retitling | No | Yes |
| Protects assets from Medicaid | No | No |
That last row deserves its own section.
The Medicaid Question, Where Most Guides Stop Short
Here’s something many estate planning articles don’t tell you: a standard revocable living trust offers no protection from Medicaid.
If you or a spouse ever needs nursing home care in New Jersey, Medicaid will count assets in a revocable trust as yours. That’s because you control the trust, you can take assets back out at any time. From Medicaid’s perspective, revocable trust assets are no different from assets sitting in a bank account.
Nursing home care in New Jersey costs upward of $10,000 per month. Without planning, those costs can consume a lifetime of savings quickly. That’s where Medicaid planning comes in, and where the type of trust you choose matters enormously.
Revocable vs. Irrevocable Trusts
When setting up a trust, you have two fundamental options: revocable and irrevocable. Most people are familiar with revocable trusts, but irrevocable trusts serve a very different purpose in elder law planning.
A revocable trust gives you flexibility. You retain control and can change or dissolve it at any time. But because you can take assets back, Medicaid counts them as yours. A revocable trust will not help you qualify for Medicaid.
An irrevocable trust cannot be changed once it’s created. You give up direct control over the assets placed in it, but those assets are no longer counted as yours for Medicaid eligibility purposes. A Medicaid Asset Protection Trust is a specific type of irrevocable trust designed to shield your home and savings from long-term care costs while still allowing them to pass to your family.
The five-year look-back rule
The critical rule to understand is New Jersey’s five-year look-back. When you apply for Medicaid, the state reviews your financial transactions going back five years. If you transferred assets into an irrevocable trust within that window, Medicaid will impose a penalty period, a stretch of time during which you’re ineligible for benefits, even if you’d otherwise qualify. The length of the penalty is calculated by dividing the transferred amount by the average monthly cost of nursing home care in New Jersey.
This means timing is everything. A Medicaid Asset Protection Trust needs to be funded at least five years before you apply. The families who protect the most are the ones who plan while they’re still healthy.
If a health crisis arrives before that window is established, options still exist, but they’re more limited and more urgent. That’s what Medicaid crisis planning is designed to address.
How the pieces fit together
For most New Jersey families concerned about long-term care, a complete plan typically includes:
- A revocable living trust to manage your estate, avoid probate, and plan for incapacity
- A Medicaid Asset Protection Trust, funded well in advance, to protect your home and savings from long-term care costs
- A pour-over will to catch anything outside the trust
These tools work together. The revocable trust handles your estate. The irrevocable trust handles Medicaid. The will serves as a backstop.
Tax Implications: Living Trusts and Wills in New Jersey
Both wills and trusts have tax implications worth understanding.
New Jersey no longer has a state estate tax, it was repealed in 2018. But New Jersey does still impose an inheritance tax on certain beneficiaries. Class A beneficiaries, spouses, children, grandchildren, and parents, are fully exempt. Siblings, friends, and more distant relatives may owe tax on what they inherit, regardless of whether assets pass through a will or a trust.
If your estate plan involves leaving assets to people outside the Class A category, how your plan is structured, including how trusts are drafted and funded, can affect how much tax those beneficiaries owe.
At the federal level, the estate tax applies only to very large estates. For 2025, the federal exemption is $13.99 million per individual. Most New Jersey families will not be affected, but for larger estates, coordinating federal and state planning matters.
When a Will May Be Enough
A will may be sufficient if:
- Your total estate is modest and straightforward
- Most assets already have named beneficiaries, retirement accounts, life insurance, and jointly held property pass outside probate anyway
- You have no concerns about privacy or probate delays
- Long-term care planning is not a current concern
For simpler estates, a well-drafted will paired with updated beneficiary designations can accomplish most of what a trust would.
When a Living Trust Makes More Sense
A revocable living trust is worth the additional investment if:
- Your estate is over $1 million
- You own real estate in New Jersey or in other states
- You want to avoid the delay and public nature of probate
- You want more control over how and when beneficiaries receive assets
- You’re concerned about incapacity and want a smoother management transition
And if long-term care costs are a concern, which they are for most New Jersey families over 60, a conversation about a Medicaid Asset Protection Trust should happen at the same time. The sooner an irrevocable trust is funded, the more options you have.
The Role of Trustees and Executors
The people you name to carry out your plan matter.
A trustee manages the trust’s assets according to the trust’s terms, handling investments, distributions, and other administrative duties. With a revocable living trust, you typically serve as your own trustee during your lifetime.
An executor administers your estate through the probate process, gathering assets, paying debts and taxes, and distributing what remains according to your will.
Choosing the right people for these roles, and making sure they understand what’s expected of them, is an important part of putting a solid plan together.
Frequently Asked Questions
Do I need both a will and a living trust in New Jersey? For many families, yes. The trust handles most of your assets and avoids probate; the will catches anything outside the trust and handles things like guardian designations for minor children.
Does a living trust protect assets from Medicaid in New Jersey? No. A revocable living trust does not protect assets from Medicaid, those assets are still counted as yours. A Medicaid Asset Protection Trust, which is irrevocable, is the tool designed for that purpose. It must be funded at least five years before applying for Medicaid.
What is the five-year look-back rule? When you apply for Medicaid, New Jersey reviews your financial transactions for the prior five years. Transfers made during that window, including transfers into an irrevocable trust, can trigger a penalty period that delays eligibility. Planning well in advance avoids this problem.
Can I be my own trustee with a living trust in New Jersey? Yes. With a revocable living trust, you typically serve as your own trustee during your lifetime and name a successor trustee to take over after your death or incapacity.
How long does probate take in New Jersey? On average, nine to twelve months. During that time, assets in the estate are generally unavailable to beneficiaries. Assets held in a trust pass outside probate and can be distributed much faster.
Can a will be contested in New Jersey? Yes. Wills can be challenged on grounds such as lack of capacity or undue influence. Trusts are more difficult to contest and generally offer more stability when family disagreements arise.
We’re Here to Help
Choosing between a will and a living trust, and deciding whether Medicaid planning belongs in the picture, depends on your assets, your family, and your long-term goals. These decisions are connected, and getting them right together matters more than getting any one piece right in isolation.
Benjamin D. Eckman, Esq. has focused exclusively on elder law and estate planning in New Jersey for decades. Whether you’re starting your estate plan for the first time or revisiting one that hasn’t been updated in years, we can help you put the right pieces in place. Schedule a consultation here.
