Testamentary trusts are a type of trust that is created through your Will after you pass away. In this article, we will go over what a testamentary trust is and how it works.
Testamentary trusts are trusts set up by your Last Will and Testament. Your Will instructs your executor to set up the trust upon your death. To do this the validity of the Will must be proven by the court. This is done by filing probate. Once this is done, your executor will be able to set up the trust and transfer your assets.
Setting Up Testamentary Trusts
When you set up a testamentary trust, there are a few key pieces of information you will need to provide. First, you will need to know who you want to be your executor. This is the person who will be in charge of distributing your estate after you pass. You will then need to decide if you want to set up multiple testamentary trusts, or just one. For example, you could instruct for separate trusts to be set up for each one of your children. Then you will need to name a trustee of your trust, they will be the ones in charge of administering your trust assets. Lastly, you will need to list which of your assets you want to be transferred into the trust. It is important to note that you do not need to transfer all of your assets through your trust, you can still give assets away through your Will.
Testamentary Trusts vs. Living Trusts
Testamentary trusts and living trusts function very differently. It is important you understand the difference between them before you set up any estate planning documents. The first difference is that when you create a living trust while you are alive, but a testamentary trust does not come into existence until after you pass. The second difference is the most important difference. That is that a living trust will help your estate to avoid probate, whereas a testamentary trust will not. Since it is part of your Will, it must go through probate and will become public information.
Setting Up Your Estate Plan
When you decide you need to set up an estate plan, you will need to decide what is best for your situation and whether or not you want your estate to avoid probate. You should meet with a qualified professional who can help explain your options so you can decide what is best for you.
Questions? Want to schedule an appointment? Contact us by clicking here.