A testamentary trust is created through the person’s last will and becomes effective upon their death. Trusts are legal entities that hold assets, and money or other assets in the trust are managed according to the wishes of the person who created the trust, known as the grantor. Once the person dies, their assets are placed in the trust and are distributed according to the directions in the trust. A testamentary trust is a great way to leave an inheritance to someone who may not use their bequest wisely, or who may need to guard against substance abuse, gambling, predatory relationships, or even divorce, says the recent article “What is a Testamentary Trust and How Do I Create One?” from wtop news.
A trust can also be created while a person is living, called a revocable trust or a living trust. Assets moved into the trust are distributed directly to heirs upon the person’s death and do not go through the probate process. However, they are administered without probate, as long as they are in effect. Living trusts are also managed outside of the court system, while testamentary trusts are administered through probate as long as they are in effect.
A testamentary trust is used to manage and protect assets. If you are concerned about an adult child getting divorced and don’t want their inheritance to be lost to a divorce, a trust is one way to keep their inheritance from being considered a marital asset.
Having an estate planning attorney create the trust protects the grantor and the beneficiary in several ways Trusts are governed by state law, and each state has different requirements. Trying to set up a trust with a generic document downloaded from the web could create an invalid trust. In that case, your wishes won’t be followed.
Once a testamentary trust is created, nothing happens until you die. At that point, the trust will be created, and assets moved into it, as stipulated in your last will and testament.
The trust can be changed or annulled while you are living. To do this, simply revise your will with your estate planning attorney. However, after you have passed, it’ll be extremely difficult for your executor to make changes and it will require court intervention.
Reference: wtop news (July 19, 2021) “What is a Testamentary Trust and How Do I Create One?”