If you’re just beginning to think about putting your estate plan in place, you’re likely coming across a lot of unfamiliar terms. One is probably “testamentary trust.” These trusts can be set up for a number of different purposes. People often use them to provide for their children or grandchildren.
They can be set up with specific conditions that direct the money in the trust to be given to the beneficiary in limited increments or only when they reach a certain age or other milestone. Trusts for children or other relatives with special needs can be established as testamentary trusts. Sometimes testamentary trusts are used to manage charitable contributions.
Your role in setting up a testamentary trust
A testamentary trust is only established once the grantor has died. That means if you want to have trusts to provide an inheritance to each of your children after you’re gone, you would provide instructions in your will detailing the beneficiary, amount, purpose and other instructions for each trust.
You’d also name a responsible person to be the trustee (and preferably an alternate). They will establish the trust and manage and disburse the funds according to your instructions after you’re gone.
You have the option to add or remove instructions to set up testamentary trusts for as long as you’re alive and have the capacity to make changes to your estate plan. You can also change specific instructions for the trustees to follow – and change the trustees themselves – if you choose.
You can’t avoid probate with a testamentary trust
Testamentary trusts aren’t the right choice for everyone. For example, it’s not for you if one of your goals is to have your estate plan avoid going through probate. A testamentary trust will need to go through probate. Specifically, the executor of your estate must provide the court with the appropriate documents (including “letters testamentary” for each trust) to establish them using assets from your estate.
Estate planning doesn’t have to be complicated. The key is to determine what your goals are and then to find the right estate planning tools for those goals. With seasoned legal guidance, you can have peace of mind that you’re providing for your loved ones after you’re gone.
