It’s not uncommon for the breadwinner of the family to carry a significant burden on their shoulders. They often worry about how their heirs will continue to thrive without them once they’re gone.
It can be particularly important for a testator to have the comfort in knowing that their minor child will responsibly use the funds they leave them if they prematurely pass away before they reach adulthood. Testamentary trusts can give you peace of mind in knowing that you have a plan in place and a sustainable plan for distributions that will continue to provide for your loved ones once you’re gone.
How does a testamentary trust work?
A testator creates a testamentary trust when drafting their will. They list the instructions for the handling of their assets in this legal document. It goes into effect once a testator dies. Testators can have more than a single testamentary trust.
The testator must not only designate which items fund the trust but also name the trust’s beneficiary when creating it. They must draft the distribution instructions at that time as well. It’s also imperative that they appoint a trustee to manage the trust and distribute its assets per the trust’s instructions.
How do living and testamentary trusts differ?
Testamentary trusts go into effect upon the creator’s death, whereas a living one becomes effective while the trustor is still alive.
Living trusts can be either revocable, or modified, or irrevocable, meaning no changes can be made to them. Testamentary trusts are different in that the trustor can change them up until their death. It only becomes irrevocable after their passing.
One benefit to funding a living trust is that it doesn’t have to pass through probate. It avoids this process since assets pass on to their new owner while the trustor is still alive. Owners of testamentary trusts retain control of their assets up until their death, so their estate must pass through the probate process.
There are many pros and cons associated with funding different trusts. When making your estate plans, all the different options available to you can seem bewildering. Experienced legal guidance can help you better understand what will work best for your family.