A testamentary trust can be beneficial for families with minor children.
A last will and testament is used to distribute assets to heirs when you die.
This can be a straightforward process for adult heirs.
When minor children inherit, the distribution of assets can become a bit more complicated.
According to a recent wtop news article titled “What is a Testamentary Trust and How Do I Create One?,” minor children cannot receive a direct inheritance.
They are not legally able to inherit assets and make their own decisions.
Although a testamentary trust can be beneficial if your circumstances involve minor children, it can also benefit adult heirs who have a history of making unwise choices.
What is a trust?
A trust is legal entity.
It administers assets titled to the trust.
With a testamentary trust, instructions are provided in the last will of the willmaker to create the trust through probate after the willmaker dies.
After the death of the willmaker and the closing of the probate of the last will, the assets are transferred to the trust to be managed and distributed.
Unlike a testamentary trust, a revocable trust is created while the grantor (i.e., trustmaker) is still alive.
This is also known as a revocable living trust.
Because the revocable living trust is created prior to the death of the grantor, the assets held in the trust are not subject to probate.
Instead, these assets are distributed directly to heirs according to the wishes of the grantor.
With a revocable living trust, the assets are managed by a trustee named within the document.
With a testamentary trust, the trust is administrated through probate for the entire life of the trust.
In instances where litigation is anticipated, a testamentary trust may prove more beneficial than a revocable living trust because of the court oversight.
If your children are young, then a testamentary trust can become expensive and cumbersome.
To decide whether a testamentary trust or a revocable living trust better fits your needs, work with an experienced estate planning attorney.
Reference: wtop news (July 19, 2021) “What is a Testamentary Trust and How Do I Create One?”