Living trust vs will header

What is a testamentary trust?

Testamentary Trust?


A testamentary trust is similar to a living trust but instead of being created during the creator's lifetime, the trust is created by a will after the will's creator passes.

A will can create multiple testamentary trusts and some or all assets in the estate may be assigned to the trust.

Purposes for a testamentary trust:

  • Control property for minors or beneficiaries who spend recklessly
  • Creating life estates for a beneficiary to use certain assets before those assets are distributed to someone else

The testamentary trust is irrevocable, meaning changes to the language cannot be made once the will's creator passes.

Testamentary trusts, like living trusts, have a trustor (the creator of the will), trustee (the person managing the trust) and beneficiaries. The trustee manages the assets for the benefit of the beneficiaries. The probate court oversees the implementation and management of the testamentary trust.

Testamentary trust advantages

Advantages

  1. The low cost upfront to create the will with the testamentary trust
  2. The protection of assets from young or reckless beneficiaries
  3. If you are not sure how much you can rely on your trustee to act responsibly, a court will oversee your trustee's activities

Testamentary trust disadvantages

Disadvantages

  1. The trustee must meet with the probate court regularly (if your trustee is reliable)
  2. Over time probate court and attorney fees could add up
  3. Assets in a testamentary trust do not avoid probate (depending on the size and location of your estate's assets)

Testamentary trust advantages

Sample Uses

Young beneficiaries
A young family not concerned with probate and with few assets has a term life insurance policy for $500,000. The parents do not want their children to potentially receive a large sum of cash at age 18. The parents could create a will to name guardians for the children and include provisions for a testamentary trust to hold the life insurance proceeds until the children are age 30.

If the children need money prior to age 30, the children or their guardians may ask the trustee for a partial or full early distribution for health, education, maintenance or support needs. The trustee has the authority to approve or deny the request.


Surviving spouse
In a second marriage, the wife owns the primary residence. If she passes first, she would like her husband to continue living in the home until he chooses to move out or passes away. When either happens, the home is then distributed to her children.

The testamentary can also hold money to help pay for the mortgage, taxes and utilities if the will instructs money to be transferred into the trust..




View sample last will

Sample Last Will and Testament

View a famous celebrity's last will and testament. You may notice a testamentary trust is created by the will to care for several of the celebrity's beneficiaries.

Living trust will kit

The Estate Director

Even if you have a will or living trust in place, how prepared is your estate for someone to step in and act quickly? Read powerful testimonials for these useful planning tools which can save time and money for a spouse, your executors, trustees, agents acting under powers of attorney and guardians for your children.

"I was an accountant and business manager for over 20 years. I have personally lost two close friends who were attorneys and clients of mine. As I began to work in settling their estates, I was amazed at the amount of information I didn't know and needed. And I hated every call to loved ones to gather that information... continue." - Jerilyn, Retired Accountant

Estate planning guide download

Copyright © 2012
Important: Please consult with a legal professional before undertaking any actions. The information in this web site is provided with the understanding that the publisher is not engaged in rendering legal, tax or investment advice. While every attempt has been made to provide current and accurate information, neither the author nor the publisher can be held accountable for any errors or omissions. You agree not to hold any employee or person associated with www.livingtrustvswill.com liable for action you take from the information on www.livingtrustvswill.com.


Warning: include(estate-planning-links2.php) [function.include]: failed to open stream: No such file or directory in /home/content/25/5509725/html/livingtrustvswill/testamentary-trusts.php on line 213

Warning: include() [function.include]: Failed opening 'estate-planning-links2.php' for inclusion (include_path='.:/usr/local/php5/lib/php') in /home/content/25/5509725/html/livingtrustvswill/testamentary-trusts.php on line 213