Testamentary Trusts – The Pros and Cons
What is a testamentary trust and what are the pros and cons of having a testamentary trust? A testamentary trust is a trust that is created within a will. So you may recall that one of the most basic estate plans that you can have is a will that does not avoid your family from having to go to probate court, but it does allow you to express your wishes and make sure that the right people get your stuff and to appoint the manager of your estate. Sometimes people draft wills and they include in them instructions that a trust should be created when you pass away. So within the will, it says when I pass away, a trust needs to be created for the benefit of X, Y, and Z. Basically, it’s a trust that doesn’t exist until you pass away, but you’re not actually drafting the trust. You’re just instructing your personal representative, your executor, and ultimately the judge that you want a trust after you pass.
There are pros and cons to these types of trusts. In many cases, I don’t recommend it, and I’ll explain why. First, if you have a testamentary trust within a will, the will does not avoid probate court. And the other thing, when people do a will or they don’t have any kind of estate plan whatsoever, then your estate is going to be public. Meaning your representative will have to lodge it with the court, which makes it a public record. So the public can see what your wishes were and they will see that this trust is going to be created for the benefit of X, Y, and Z. That will now be on the public record. One of the benefits of having a living trust, creating a trust and not a testamentary trust, but creating a trust for yourself now is that it’s completely private. A testamentary trust is not private at all. It will be public record.
Second, since all you’re directing your manager of your estate to create the trust, you won’t have a hand in how the trust is drafted. When you make a living trust while you are living, then you have instructions for your counsel. In the case of a testamentary trust, you’re just saying, create a trust, you’re not really giving any sildenafil mylan indl gsseddel platformen ved specifics about the parameters or that kind of stuff. That’s not even something that you’re privy to because you won’t be here.
Finally, the reason that I really don’t think testamentary trusts are always the best solution is because it leaves a lot of things up in the air. This goes along with the reason number two, you’re not actually creating this trust, you’re simply instructing somebody to create it on your behalf. There’s no room in the will, nor is it something typically done. You’re not actually creating that trust while you live. So you can’t explain who you want to be the trustee. Generally, it’s who gets the benefit of the trust. You might be able to explain who you want to be the trustee, but that’s it. There’s no other parameters.
In sum, I would not recommend a testamentary trust for most people. Now, there are certain circumstances where it might be appropriate and I’ll give you an example. One would be, and this actually happened, you have a young couple with young children. They’re concerned about what happens if they pass away, they have life insurance policies for their kids in case they do pass, but they’re worried about who’s going to be the guardian, how is the money going to be distributed, et cetera. They don’t have a lot of money, so they’re not looking to set up a living trust. Living trust are not expensive, but they cost more than a will. So if it’s a last resort, like with this particular couple, we set up a testamentary trust, meaning that the will directed that a trust would be created for their children in the event they both pass away and that’s because they had minors and they just were really pinching pennies and did not want to go through with a living trust at that point, the idea being that literally in a few months after this pandemic is over and they can get back on their feet, they will go ahead and create a living trust because it is much more secure if you have a living trust.
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