There are many different types of documents and tools that can be used in estate planning, one of which is a testamentary trust. If you are making plans for the future it is important to understand all of your legal options in terms of distributing assets to beneficiaries. Work with a Sussex County trust lawyer to learn more about the various types of trusts and documents that can benefit you and your family.
What is a Testamentary Trust?
A testamentary trust is a specific type of trust that is created through a person’s will. The trust is designed to help manage and distribute the individual’s assets after they pass away. The grantor (the creator of the trust) leaves instructions in their will outlining how their assets and property should be managed and distributed. They will name an executor and trustee to ensure their wishes are carried out as intended.
A testamentary trust differs from a living trust, which is established during a person’s lifetime. Although the individual sets up the details of the testamentary trust while they are alive, it is not technically formed until their death.
How Does a Testamentary Trust Work?
After the grantor dies, their will must go through probate court to be authenticated and validated. The will outlines the terms of the trust including the following.
The trustee, as in the person or entity who has been appointed by the grantor to manage the trust and carry out its instructions
The beneficiaries, as in the individuals or organizations who will receive the assets and benefits in the trust
Conditions of the trust, as in the specific rules regarding the distribution of assets like when the beneficiaries are eligible to receive their portion
Once the death certificate and a letter of testamentary (the document that establishes that the court has authorized the will’s executor to act) have been obtained, the testamentary trust can be established. The trustee will then carry out the wishes of the departed and manage the assets on behalf of the beneficiaries.
Does a Testamentary Trust Avoid Probate?
One major benefit of a living trust is that it does not have to go through probate court upon the grantor’s death. A testamentary trust, however, does not have this benefit. Because the trust is established through the will and only after the individual’s death, a probate court must validate the documents. The process of authenticating the will and trust can take months or even years to complete. This delays the beneficiaries’ ability to receive their assets. Probate is also public, meaning that the contents of the trust may become public record.
There are pros and cons to any type of estate planning document and it is essential that you fully understand the implications of a testamentary trust before establishing one in your will. Reach out to an experienced estate attorney for more information and skilled representation.
