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What is a Testamentary Trust Will?

Estate Planners | Monday, July 18th, 2011

A common estate planning tool is the testamentary trust will. This type of will is used to set up a trust or trusts that part of or all of your estate will be transferred into when you die. The testamentary trust will is sometimes just referred to as a ‘testamentary trust’ and is similar in structure to the family trust, but with some distinct differences that can be very advantageous over other types of trusts, particularly if you are planning on leaving your estate to minor heirs, young adults, or children with disabilities. This trust is often chosen when the death of a parent or both parents might trigger the disbursement of large amounts of money, such as is the case with life insurance payouts.

The testamentary trust is created in a will, thus the name, testamentary trust. The trust is activated after the death of the parent, when a trustee (who is named in the will) will be appointed to handle the funds and assets within the trust until a particular point in time, typically when the child reaches the majority age or older or when they have completed their college education.

The trustee will be watched over by the probate court system, and will be required to do an annual accounting of the trust for the court, in most cases. For this reason, the testamentary trust will often incurs legal fees that are taken from the trust or trust income. Many people opt for a revocable living will in lieu of a trust to lessen the legal fees that are involved in administering a testamentary trust. Nonetheless, if one or both parents’ death will result in a large disbursement of life insurance, the testamentary trust can be superior to a revocable living will in that it will allow the parents to dictate the terms for which they want their children to be provided for should the parent pass away unexpectedly.

Choosing a Trustee for the Testamentary Trust Will

One of the most crucial aspects of the testamentary trust will is determining who would be an ideal trustee for the term of the trust. Appointing someone in a will is not a certain guarantee that the person will take up the task, as it is time-consuming and represents a big responsibility on the trustee’s part. If a trustee is not named in the will, or if the named trustee fails to act, the court will appoint a trustee, or consider volunteers from among the beneficiaries’ relatives or friends. It is far better for the testator to name a trustee and to name a person with whom they have discussed the appointment with prior to making the testamentary trust will so that they have the peace of mind that the person named will act. This person can be a relative, friend, or even a trusted lawyer or other professional.

The optimal way to find out if a testamentary trust will is the right tool for providing for your family’s future in the event of your death is to discuss your personal situation with an estate planner.

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