Testamentary Trust

Testamentary Trusts, which are established in a Last Will and Testament, can help you set up an effective way to manage assets for beneficiaries after you pass away.


What is a Testamentary Trust? 

A Testamentary Trust is essentially a Trust under your Will. This means directions for how the Trust should be set up are outlined in advance in your Last Will and Testament. It’s important to understand that a Testamentary Trust doesn’t actually become established until after you pass away. You use your Will for appointing an Executor and to state other directions for the Trust, including who the Trustee and beneficiaries should be, and what assets the Trust should hold. Upon your passing, the Trust can then be seamlessly established and funded. 

Testamentary Trusts can be excellent estate planning tools. They’re often used as a way to set up financial structure and security for minors who may not be able to manage an inheritance due to maturity level, age or any other reason. This type of Trust can be an effective way to ensure that assets are professionally managed for beneficiaries. It can also be a smart way to reduce estate tax liabilities so your loved ones can get as much as possible from your estate.

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Testamentary Trusts for Children & Blended Families 

Testamentary Trusts have a number of beneficial aspects, especially if you’re setting up an Estate Plan for the benefit of minors, or in the case of blended families. Some of these benefits might include:

  • Greater control and protection over assets

  • Ability to limit beneficiary’s access until determined age or time

  • Can be modified during the Grantor’s (the person who is making the Estate Plan) lifetime

  • Tax benefits for beneficiaries

  • Unlimited beneficiaries allowed

  • Pension protection


How a Testamentary Trust Works 

One of the biggest questions people often have about this estate planning tool is how is a Testamentary Trust different from a Living Trust? The first (and perhaps biggest) difference is that Testamentary Trusts do not take effect until the Grantor passes away. Living Trusts, by contrast, take effect as soon as you fund them. 

Once the Grantor passes away, the Trust is created, funded and becomes irrevocable (meaning it can’t be changed). This gives the Grantor great flexibility to make changes at any time during his or her lifetime, with little effort. When a Testamentary Trust is created, all of the guidelines are dictated directly from the Will, which states how the Trust should benefit anyone who stands to inherit assets.

Learn more
What is the purpose of a Testamentary Trust?
Does a Testamentary Trust avoid probate?
Who owns the assets in a Testamentary Trust?
Who pays tax on a Testamentary Trust?

How to Create a Testamentary Trust in just a few steps: 

  • 1

    Name a Trust Beneficiary.

    Select the beneficiary or beneficiaries who should receive assets from the Trust. Be sure you clearly identify them in your Will so they can be included once the Trust is established (after you pass away).

  • 2

    Designate a Testamentary Trustee.

    Choose a Trustee whom you have total faith in. He or she must be an adult, responsible, willing and able to take on the role of managing the Trust and eventually distributing assets per the Trust documents (as outlined in the Will).

  • 3

    State which assets should pour over into the Trust.

    Be sure to clearly identify what assets should be used when funding the Testamentary Trust. You can put any assets into the Trust, as long as you understand that once the Trust is established, it becomes irrevocable and cannot be changed.

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