Testamentary Trusts
A testamentary trust can accomplish many of the same tasks as a living trust, with the notable exception of helping assets avoid probate. The reason for this difference is due to when the trust is created.
A living trust is created while the trust's creator is living and assets can be transferred into the trust before a probate would occur. A testamentary trust is created after the owner of the assets passes, which means assets subject to probate will not avoid the process.
A testamentary trust is created by a last will and testament and assets are transferred into the testamentary trust once creditors and other obligations have been settled in the probate process.
Once the testamentary trust is funded, it operates similar to a living trust. A trustee manages the assets in the trust for the beneficiaries. The trustee must follow the instructions and spirit of the trust and is held accountable by the beneficiaries.
Testamentary trusts are often used when probate is not a concern but families wish to:
- Control distributions to young beneficiaries
- Control distributions to special needs beneficiaries
- Maintain a residence for dependent children, their guardians or the spouse of a blended family
- Care for the spouse of a blended family before assets are ultimately distributed to the living issue of the deceased
- Maximize estate tax exemptions for married couples
An attorney can help you identify estate planning needs and determine if a testementary trust or living trust would help you accomplish your estate planning goals.