What Is a Testamentary Trust?
Personally, you may feel as though you committed enough time and effort toward your estate plan. But even if you feel as though your work is done, you may instruct a trusted third party to manage other things for you on your behalf. This may be accomplished with a testamentary trust. Follow along to find out more on a testamentary trust and how one of the proficient Butler County trust attorneys at Heritage Elder Law & Estate Planning, LLC can help you decipher whether it is worth incorporating one into your estate plan.
What is the definition of a testamentary trust?
By its general definition, a testamentary trust is a type of trust that is established in accordance with the instructions disclosed within your Last Will and Testament. In other words, your will may contain orders for how a third-party trustee should distribute your assets to your named beneficiaries. Of note, it is not necessarily mandatory to include a testamentary trust in your will.
With that being said, you may have multiple testamentary trusts. This is in case you wish to provide different levels of control over the multiple distributions of assets to your various named beneficiaries. For example, you may not want your minor beneficiary to receive their inheritance until they are of a mature age. Then, you may want your adult beneficiary to receive their inheritance in small amounts over time if they have a troubled history with money management.
How is a testamentary trust different than a living trust?
The key distinction between a testamentary trust and a living trust is that the former cannot be created until after you have passed away while the latter, as the name suggests, is established when you are still alive. So, your appointed executor may draft your testamentary trust based on the set of instructions included within your Last Will and Testament. Soon after, a portion or all of your assets may be transferred to this newly created trust. From here, your appointed trustee may step in to manage the assets until the trust expires and all your beneficiaries receive their promised shares.
However, all this is not done so immediately, since your will must undergo the probate process first. Essentially, this is a legal process in which a Pennsylvania court verfies the validity and enforceability of your will document, all while supervising the distribution of your assets.
Contrastingly, though, a living trust may avoid this process. This may arguably be a benefit that a living trust has over a testamentary trust, as you may avoid probate costs and having your contributed assets from counting toward your taxable estate, all while maintaining the privacy of your assets. This is not to say though, that a testamentary trust does not have its fair share of advantages.
Before you take any further initiative with your estate plan, we urge you to consult one of the talented Butler County estate planning & probate attorneys. Most definitely, the team at Heritage Elder Law & Estate Planning, LLC is eager to work with you.
