How Can a Testamentary Trust Benefit Me and My Family?

 Posted on June 26, 2020 in Estate Planning

The world of estate planning can be complicated, to say the least. If you have started researching your estate planning options, you may understandably be feeling overwhelmed. It can be challenging to know which types of estate planning tools will best help you meet your financial goals. You may have already decided to create a last will and testament but worry that a will alone will not satisfy all of your needs. One option to consider is a testamentary trust or “will trust.” For help determining which estate planning tools are best for your unique situation, speak with an experienced estate planning attorney.

What is a Testamentary Trust?

A testamentary trust is a trust that is in conjunction with a will. If an individual decides to create a testamentary trust, he or she will assign a trustee to manage and distribute his or her assets to the designated beneficiaries as per the directions in his or her will. Unlike a living trust, a testamentary trust does not go into effect until the trust maker, also called the trustor or grantor, passes away. Upon the trustor’s death, the executor of the estate is instructed by the trust provision in the will to create the trust. Although trusts typically avoid probate, the will must still go through the probate process in order for the authenticity of the will to be confirmed.

After probate, the trust goes into effect and the executor transfers the estate assets to the trust. The trust assets often include proceeds from the trustor’s life insurance policy or other sources as well. The trustee then manages the property owned by the trust until the trust expires and the property is distributed to the beneficiaries.

Who Should Use a Testamentary Trust?

Many people set the trust’s expiration date to coincide with a meaningful event. For example, if you wanted to use a testamentary trust to transfer assets to your grandchildren, you may want them to reach a certain age or graduate from college before they receive the assets. Commonly, testamentary trusts are used to transfer assets to minor children or loved ones with disabilities. It usually makes good financial sense to use a testamentary trust if a trustor’s estate is smaller than the life insurance proceeds or other assets that will enter his or her estate upon his or her death.

Contact a Lombard, IL Estate Planning Lawyer

Testamentary trusts are an estate planning tool that can give you a greater degree of control over when your assets are transferred to beneficiaries. If you would like to learn more about what types of estate planning tools will best meet your needs, contact A. Traub & Associates. Call our office at 630-426-0196 today to schedule a confidential consultation with a skilled Arlington Heights estate planning attorney from our firm.

Sources:

https://www.investopedia.com/terms/t/testamentarytrust.asp

https://www.thebalance.com/testamentary-vs-living-trusts-3505387