Thursday, February 23, 2012

What Is a Testamentary Trust


A testamentary trust is a trust that does not yet exist.  Instead, the recipe for its creation is embedded in your will (hence the use of the word testament).  For example, my will leaves all of my assets to my husband.  However, if he should predecease me or we die together, my will contains instructions for the court to create a trust to hold my assets, for the benefit of my children.  My will further nominates someone to manage that trust, called a trustee, and has the trust remain in existence until my youngest living child reaches age 30.  That is an age we selected, not a requirement.

Other uses of testamentary trusts include:

  • trusts for adult children who would blow through an inheritance and need a trustee to guide them;
  • trusts for aging parents who are not able to manage assets on his / her own;
  • trusts for four-legged members of the family (aka pet trusts); and
  • trusts to minimize potential estate taxes upon the death of the surviving spouse.
Testamentary trusts are commonly overlooked.  Most people are more familiar with living revocable trusts.  Check out my blog tomorrow for more on living trusts, and when I  think they are useful.

Thanks for reading, and remember a blog is not an attorney -- please consult with a lawyer for advice specific to your situation.

1 comment:

Adam Baldrick said...

Nice post!!!
Thanks for explaining about Testamentary Trust.It is designed to provide maximum flexibility and allow for tax-effective distribution of capital and income, as well as providing possible protection of your beneficiaries from third parties such as creditors.Left Out Of A Will