What is a Testamentary Trust?
“Testamentary” is a legal term related to making a will. A “trust” is where one person holds the legal title of property for the benefit of another person (not themselves). A “trustee” is the person who take the ownership in “trust” for another person (known as the “beneficiary”). A testamentary trust can be established under a will to appoint a trustee to use property for the benefit of the beneficiary in the way that the will specifies.
Unlike a Living Trust (made while you are alive), a Testamentary Trust is established through your Will at your death to handle your minor children`s estate (financial affairs), should you die and there is no other living parent. This alleviates the necessity of having to set up a guardianship of the estate, with all of the concurrent court filings, accountings and supervision. The Executor is given full discretion to decide if the Trust is beneficial to the children, and the trust should be established. If you currently have minor children, or are considering having children, including this provision gives your Executor the greatest flexibility in handling your children`s estate if neither parent is alive while the children are still minors. Normally, the person or one of the people named as guardian of your minor children will also be named the Trustee of the Trust. However, in some situations it may be advantageous to have different people fulfill these roles. For example, the best
It is a trust created by your will, which only takes effect at your death. Such trusts are often used to provide income for minor children or grandchildren, until they are old enough to manage their assets, and to provide income to care for handicapped or elderly persons. They can also provide tax savings.
A testamentary trust is a trust estate established by a person’s last will and testament. Testamentary trusts differ from traditional trusts in that the assets in question are owned by the decedent during his/her lifetime and pass into the testamentary trust for distribution during probate. Traditional trusts are the owners of the decedent’s assets during his or her lifetime and therefore the assets held by traditional trusts pass outside of probate.
