Testamentary Trust
What Is a Testamentary Trust?
A testamentary trust is a trust that is established through a will and becomes effective only after the person who created the will dies. The trust instructions are included within the will and are carried out during the probate process.
Testamentary trusts are commonly used to manage assets for beneficiaries who may not be ready to receive a full inheritance immediately.
Why It Matters
Testamentary trusts allow individuals to control how assets are distributed after death. They can help protect assets for minors, provide financial support over time, and ensure funds are managed responsibly.
These trusts are often used when beneficiaries require structured financial oversight.
How a Testamentary Trust Works
A testamentary trust is created through instructions written in a will. After the testator’s death, the probate court validates the will and establishes the trust.
The process generally includes:
- probate of the will
- creation of the trust according to the will
- appointment of a trustee
- management of assets for beneficiaries
The trustee manages the trust assets according to the terms outlined in the will.
Example
A parent’s will states that money should be held in a trust for their children until they reach age 25. After the parent’s death, the testamentary trust is created to manage those funds.
Testamentary Trust vs Living Trust
- A testamentary trust is created through a will after death.
- A living trust is created during the grantor’s lifetime.
FAQs About Testamentary Trusts
Does a testamentary trust avoid probate?
No. Because it is created through a will, it must go through probate.
Who manages a testamentary trust?
A trustee appointed in the will or by the court manages the trust.
Why are testamentary trusts used?
They help control how assets are distributed to beneficiaries.
Related Terms
