There are many tools people can use in their efforts to achieve their estate planning goals. This includes trusts. Today, we’ll go over one particular type of trust: The testamentary trust.
What is a testamentary trust?
This is a trust that a person sets up to take effect and be funded with some of his or her property after he or she passes away. The terms creating such a trust, laying out what property will be funding it and establishing the trust’s provisions and who will benefit from it are usually placed in a person’s will. Once the trust takes effect, a trustee will manage the assigned assets in accordance with the trust’s conditions.
What can such trusts help with?
There are a range of reasons why a person might want to have terms for a testamentary trust in his or her will. Such trusts can be set up to have a variety of different provisions regarding what the trust is to do with the assets assigned to it. Given how finely tailored the terms of a testamentary trusts can be, people may find such trusts helpful when they have complex goals for what they want to have happen with their assets after they pass away.
For one, having a testamentary trust can be helpful if a person would want some of his or her assets distributed over time rather than all at once. These trusts can also be helpful for putting conditions on the distribution of assets. For these reasons, one common use of testamentary trusts is parents setting up such a trust to handle how assets will be given to their children after their death. The Trustee of the testamentary trust for the children can even be named as the beneficiary of the parents’ life insurance policies for the benefit of their children. Those insurance policies go directly to the Trustee and do not go through probate.
What can‘t such trusts help with?
However, like any tool, testamentary trusts have limits. For one, because a testamentary trust doesn’t take effect until after a person’s death, it can’t be used to help with goals a person has protecting his or her assets during his or her lifetime.
When including any type of trust in an estate plan, it is important for the trust to be properly designed to achieve its intended purposes. Skilled attorneys can help individuals with creating testamentary trusts and other estate planning tools.