A testamentary trust can be a great way to pass on assets to the next generation, but such an arrangement comes with some rules and may not necessarily be the best fit for you. A Washtenaw County trusts attorney from our firm can help you explore all of your estate planning options and establish a testamentary trust if that’s what you decide to do.
When Does a Testamentary Trust Go Into Effect?
A testamentary trust doesn’t go into effect until you pass away. You can establish the trust in your will, select beneficiaries and a trustee, and set its terms. You can edit the rules concerning this trust or abolish it to go with another arrangement by updating your will. So it offers a lot of flexibility and there’s no real sense that you’re locked in or stuck with something that you may not want in the future.
Does a Testamentary Trust Avoid Probate?
One potential drawback to a testamentary trust is that it must go through probate. When someone passes away, the probate court goes through their assets and evaluates their will, if there was one written. Then assets can be distributed to family members and beneficiaries.
Some other types of trusts, like a living trust, do not need to go through probate. Because this type of trust does go through probate, it can take a few weeks to a few months to start distributing assets to your loved ones. The contents of the trust would also be made part of the public record.
Why Use This Type of Trust?
If the probate process isn’t a dealbreaker for you, then a testamentary trust offers a few perks that could make it an attractive option. Many people like:
The cost to set one up: This type of trust is set up when you pass away, so the money just comes out of your state. Most other types of trusts have to be set up while you are still alive, which means that you’ll have to pay out of pocket to establish one.
How this trust protects minor children: This type of arrangement puts a trustee in charge of distributing money so that young beneficiaries won’t waste their inheritances. You can set an age, like 25 years old, for your loved one to receive what’s left in the trust and manage it themselves.
The flexibility: As we mentioned, a testamentary trust can be changed at any time before you pass away. Just update your will. Compare this to a living trust, which can be irrevocable. This leaves you locked out of managing your own assets or changing rules once you have established a trust’s initial parameters.
Its charitable applications: This particular type of trust isn’t just good for passing on assets to your loved ones. A testamentary trust is a great way to continue to support charitable causes once you have passed away.
Make Your Estate Plan Today
If you want to learn more about trusts and all of your estate planning options, contact Collis, Griffor & Hendra. Schedule a consultation with our team and figure out the best way to safeguard your assets and leave something behind for your children and grandchildren.
