Testamentary Trust
A testamentary trust is a type of legal arrangement that is established according to the terms of a will and comes into effect after the death of the person who created the will, known as the grantor or testator. This trust is distinctly different from an inter vivos trust, which is created and becomes effective during the grantor’s lifetime.
Examples of Testamentary Trusts
- Family Trust: A father’s will might create a testamentary trust to provide income to his surviving spouse for her lifetime, with the remainder going to their children after her death.
- Minor’s Trust: A mother’s will might establish a testamentary trust to manage and distribute her assets to her minor children upon reaching a specific age, such as 21.
- Charitable Trust: An individual’s will might specify that a portion of the estate is put into a trust to support a charitable foundation or cause after their death.
Frequently Asked Questions
Q: How does a testamentary trust get created?
A: A testamentary trust is created through the instructions set forth in a person’s will. It only comes into existence after the death of the individual and after the will has gone through the probate process.
Q: What is the main advantage of a testamentary trust?
A: The main advantage is control. The grantor can determine how and when beneficiaries receive assets, which can be particularly beneficial for minor beneficiaries or those with special needs.
Q: Who can be a trustee of a testamentary trust?
A: The grantor can appoint a trusted individual, financial institution, or professional fiduciary as the trustee to manage the trust according to the will’s instructions.
Q: Are assets in a testamentary trust subject to probate?
A: Yes, because the trust is part of the will, the assets must go through probate before the trust becomes active.
Q: Can a testamentary trust be changed after the grantor’s death?
A: No, once the grantor has passed and the will goes through probate, the terms of the trust are generally fixed and cannot be changed.
Related Terms
- Will: A legal document that sets forth how an individual’s property and affairs should be handled after their death.
- Grantor/Testator: The person who creates the will and establishes trusts.
- Inter Vivos Trust: A trust that is created and becomes effective during the grantor’s lifetime, as opposed to a testamentary trust.
- Beneficiary: A person or entity entitled to receive benefits from a trust.
- Probate: The judicial process through which a will is proved valid or invalid.
Online References
Suggested Books for Further Studies
- “Wills, Trusts, and Estates” by Jesse Dukeminier, Robert Sitkoff, James Lindgren.
- “Make Your Own Living Trust” by Denis Clifford.
- “The Complete Book of Wills, Estates & Trusts” by Alexander A. Bove Jr.
Fundamentals of Testamentary Trusts: Estate Planning Basics Quiz
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