While you may understand the basics of what a trust is, it is important to note that there are many different types of trusts. One of these various types is a testamentary trust.
Unlike a living trust, which allows for you to access the assets in the trust while you are still living, a testamentary trust goes into effect following your death.
Testamentary trusts allow you to determine which assets should be passed on to children following your death, and at what time those assets should be passed on. For example, if you were to pass before the time comes, you may want certain assets passed on to your children when they turn 18 years of age.
Are There Different Types of Testamentary Trusts?
The answer to the question above is yes. There are two different types of testamentary trusts:
- Separate trusts
- Family trusts
What is a Separate Trust?
In this form of testamentary trust, there is one trust created for each of the beneficiaries, unlike a family trust, which is covered below.
What is a Family Trust?
Unlike separate trusts, a family trust is a form of testamentary trust in which all the assets are managed in one place, rather than split by having a trust created for each of the beneficiaries.
What are the Benefits of Having a Testamentary Trust?
Contrary to living trusts, which are not subject to the probate process, testamentary trusts are. While this may not sound beneficial, it can be for those who prefer the court to have some supervision over the distribution of assets to the appropriate parties at the appropriate time.
How Does a Testamentary Trust Differ from a Living Trust?
While both are different types of trusts, testamentary trusts differ from living trusts in two key aspects: timing and being subject to probate.
Testamentary Trust vs. Living Trust: Timing
A living trust takes effect immediately, while a testamentary trust will take effect following your death.
Testamentary Trust vs. Living Trust: Probate
As indicated above, while a living trust is not subject to the probate process, a testamentary trust is. While some may seek to avoid probate, having a testamentary trust can be helpful if you want the court to ensure proper distribution of the assets in your trust.
For example, there may be particular assets that you want passed on to someone who is a minor, but want them to receive the assets upon turning 18 years old.
How Long Do Testamentary Trusts Last?
Testamentary trusts last until the expiration date of the trust. This expiration date will be set out in the terms of the trust.
What Exactly Does the Probate Court Do for a Testamentary Trust?
The probate court will follow up on your testamentary trust in order to ensure that the terms are being carried out properly (Assets are distributed to the proper individuals at the proper time).
Is a Testamentary Trust Revocable or Irrevocable?
While a living trust can be revocable (i.e. can be changed by a trustor), a testamentary trust is irrevocable. The trust will take effect following the trustor’s death; therefore, terms cannot be changed.
Testamentary trusts, much like various other forms of trusts, are a key part of any estate plan. While you may be questioning the type of trust that is right for you, we are here to assist you. Contact us today to learn more about our services.
For more information regarding estate planning and elder law matters, view our resources page here.
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