Understanding Testamentary Trusts When Administering Estates
When many people think about trusts, they automatically think about common revocable living trusts that are designed to avoid probate administration and distribute assets to loved ones. There are many different types of trusts, however. One such type of trust is testamentary trust. Testamentary trusts have several characteristics that make them very different from other types of trusts. When someone is appointed trustee of a testamentary trust, they must understand how these instruments work before beginning the administration.
How a Testamentary Trust Works
What is a testamentary trust? The following are five important characteristics:
- A testamentary trust will not go into effect until the person has died and the will is admitted to probate.
- Testamentary trusts often leave money or assets to minors under the terms of a will. This is done because children cannot receive substantial gifts directly. A testamentary trust is one way of leaving an inheritance for a minor.
- The Testamentary trust will appoint a trustee within the terms of the will.
- Testamentary trusts will contain other trust terms within the will, such as the beneficiaries, when distributions should be made, and who should receive the assets if the primary beneficiary is unavailable or pre-deceased.
- Testamentary trusts do not avoid probate. This is an important characteristic to be aware of because many people create trusts specifically for the purpose of avoiding the need for a probate administration after they pass. Unlike other types of trusts, however, a testamentary trust cannot be created until the probate court deems the will to be valid and appoints a person in charge of administering the estate. This also means that the probate court will have oversight of the administration of the testamentary trust.
Administering a testamentary trust is a big responsibility. It is important to obtain assistance from an attorney in order to ensure that you are fulfilling all of your obligations and avoiding any potential liability. Fortunately, we are here to provide you with the help that you need. We encourage you to contact us today at (888) 443-6590 for more information.