You have likely heard of a trust, maybe in movies or television shows where children of wealthy parents are set for life. However, anyone can create and benefit from having a trust. There are many different types of trusts designed for different purposes and circumstances. To learn what a testamentary trust is, continue reading here and reach out to an experienced Middlesex County trust lawyer for skilled legal advice.
What is a Testamentary Trust?
Estate planning is crucial in ensuring that your assets and property are handled as you wish after your death. One of the tools often used is a trust. A trust is a fiduciary relationship that allows a third-party individual (the trustee) to manage the assets and estate of an individual (the grantor). Essentially, it allows your assets to be distributed according to specific instructions.
A testamentary trust is a type of trust that is created through a person’s will. Unlike a living trust which is established and can be used while the grantor is alive, a testamentary trust only takes effect upon the grantor’s death. It is a provision within the will that outlines how the estate should be handled by the trustee, but it does not technically get created until the will is validated, which only happens when the grantor has passed away.
How Does a Testamentary Trust Work?
The process of creating and managing a testamentary trust involves several steps and regulations. The trust will be outlined in the grantor’s will. It will appoint a trustee, identify the beneficiaries, and explain the terms and conditions of the trust like how and when assets will be distributed to the beneficiaries.
Because the testamentary trust lives within the will, it does not become active until the grantor has died. At this time, the estate goes through probate, and the will is validated by the court. Once probate is complete, the assets outlined in the will will be transferred to the testamentary trust. The trustee is responsible for managing the estate and distributing assets according to the terms outlined in the will. They may have to pay off certain debts and expenses, invest funds, donate to charitable causes, liquidate assets, and distribute property and assets to the appropriate beneficiaries.
Because the trust allows the grantor to establish specific terms, the trust could last a significant amount of time. It will only last until the terms of the trust expire and the assets have been distributed to the beneficiaries. For example, a grandparent may leave money to their grandchild but stipulate that they only gain access once they have graduated from college.
If you have questions about the use of a testamentary trust or other estate planning topics, do not hesitate to contact a skilled attorney at Mark Liam Gannon, Attorney at Law today.
