What is a testamentary trust, and do you need one?

When you work on your estate plan, you probably have at least some idea of who you plan to name as beneficiaries. In some cases, you may want to have more control over when your beneficiaries get to access their portion of your estate. One method many people in your shoes choose to utilize to accomplish this is to create what is known as a testamentary trust.

Essentially, a testamentary trust, or a will trust, is one you include in your last will and testament. It dictates that the assets placed inside will undergo distribution once you pass away. Because a testamentary trust does not take effect until you pass on, you have the option of making changes to it up until you die. Some people working on their estate plans prefer having this flexibility, as opposed to the inflexibility that comes with, say, irrevocable trusts.

Creating the testamentary trust

If you decide to move forward with creating a testamentary trust, you will need to determine who you want to name as your trustee. You will also have to dictate exactly which of your assets you plan to include within the trust. You will also need to specify who your beneficiaries are and when you would like those distributions to take place; this is one of the reasons many people choose to create this type of trust in the first place.

For example, you can make stipulations when you create the testamentary trust that dictate that, for example, your son will receive his share of what is inside the trust upon graduating college, getting married or what have you. Or, conversely, you may decide to leave assets behind for a grandchild using this method. You may decide that this loved one should receive his or her distributions once he or she comes of age.

Testamentary trusts have benefits and drawbacks, but many people find that creating one is a useful and important step in the estate planning process.

Share on:


Fields marked with an * are required