A Journey Into Estate Planning: The Testamentary Trust
August 9, 2017
(First read the introduction post and find links to the other Journey Into Estate Planning posts).The Testamentary Trust may be included within your Will, although sometimes it is its own separate document. “Testamentary” means “after death”, so this Trust would go into effect after you die, as opposed to going into effect immediately.
Why would you want a Trust to only go into effect after you die? A very common answer is for people with minor children. We cannot give a five-year-old money. And even the most prudent 18-year-old may not be at a place in their lives to handle large sums of money. That is why many parents will set up a Testamentary Trust for the benefit of their children, so it can be disbursed for health, education, and well-being, while they are young, and any remaining assets will be given to them at one or multiple designated ages (25, 30, 35 or whatever age the parent(s) chooses).
Parents (or any adult) may also choose to set up a Testamentary Trust because they don’t have the liquid assets while they are alive to warrant using a Trust, but when you combine retirement, life insurance, real property, and other financial accounts, it very much does make sense to have a Trust for the benefit of their children or other chosen beneficiary.
The Trust will name a couple of important people. First, the Trustee: the person who administers/handles the Trust assets. This should be someone who is excellent with money and responsible to follow all Trust requirements. Next the Trust will name the Beneficiaries: the people for whom the Trust is created. This may be the minor children, or it could be adult children, or even an organization. Whomever the person who created the Trust wants to provide for.
This document should be reviewed every couple of years. Certainly if you have it for the benefit of your minor children, but now your children are all (older) adults, it may be time to take it out of your estate plan, or modify it to fit your current situation. An attorney can help determine when and if it is necessary to update your estate plan.
If you have questions about estate planning for yourself or your family, contact Claire Tralle to set up a free initial consultation today.
The information in the Journey Into Estate Planning series are intended to provide information only. No legal advice is being provided or implied via this blog post. No attorney-client relationship is formed by providing this information. An attorney-client relationship with Tralle Law, LLC is formed only after a retainer contact is signed by all parties.
I like how you mentioned that testamentary means after death which means it takes effect after you die. My son is 20 and has special needs so we’re thinking of doing a trust for him. I’ll be sure to find a lawyer that has experience in this specific type of trust.