Barbara Sadler: Putting a Trust in a Will

There must be a valid will to properly designate how and to whom a person’s property is distributed upon their death. If you would like to create a trust that will come into effect only after your death, consider putting a testamentary trust into your will. Read on to learn about how to place a testamentary trust in a will.

What Is a Testamentary Trust?

A testamentary trust is a type of express trust that is written in a will or in a document incorporated by reference into a will, which arises upon the death of the settlor. It specifies what assets or funds are to be distributed after the death of the settlor. Testamentary trusts are preferred over other types of trust because they can protect the assets from the immaturity of minor children or other family members.

Regarding testamentary trusts, the following parties are involved:

Settlor: is the person who creates the trust to transfer his or her assets to the beneficiaries. This person is also called the “grantor” or “trustor.”
Trustee: is the person who will handle the trust and manages the assets or the funds involved in the trust. A trustee holds the legal title to those assets.
Beneficiary(s): is a person or entity that receives a benefit from the trust. Beneficiaries of a testamentary trust are usually minor children, family members with disabilities, or anyone who inherits a large sum of money.
The probate court: is a court that has jurisdiction over the probate of wills and administration of estates. The probate court will check up on the trust and make sure it is being properly handled.

Creating a Testamentary Trust In a Will

To create a testamentary trust in a will, the settlor must designate a trustee and specify the beneficiaries. As mentioned above, a testamentary trust comes into effect not until the settlor dies. Thus, the testamentary trust must be contained in the settlor’s last (final) will, so the trust can be created upon the settlor’s death.

Then, the probate process will take place. A testamentary trust is not automatically created upon the settlor’s death. While other types of trusts may avoid probate, a testamentary trust must go through the probate process. The testamentary trust will come into effect upon the completion of this process.

After the provisions are reviewed by all parties, a trust will proceed to generate distributions. A trustee, chosen by the settlor, will manage the property or funds in the trust until the trust terminates. The trustee may be required to go to the probate court at least once a year and ensure the court that the trust is being handled in accordance to the will and state law.

Example of a Testamentary Trust in a Will

Let’s say you decide to include a testamentary trust in your will. You have a 3-year-old daughter and you want her to receive your assets after you die. You designate your uncle, Bob, as the trustee of your testamentary trust. You specified that upon your death, Bob will manage your assets for the benefit of your daughter until she reaches the age of 21. You want Bob to be in charge of giving your daughter monthly income for education and expenses. When your daughter turns 21, she will receive the remaining assets, and the trust will terminate.

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