Questions about how to provide for irresponsible family members and minor children are common in estate planning. Rather than simply not leaving assets to those loved ones, you may want to consider your planning options. Fortunately, numerous estate planning tools can be utilized to create a plan for you and your family. A testamentary trust is one such estate planning tool.
Continued control after death
A testamentary trust goes into effect after a person’s passing. A testamentary trust is created in a will. If you want to utilize this planning tool, testamentary trust provisions can be included in your will. Such provisions will address which assets you want to be put into the trust, who the beneficiaries of the trust will be, and whom you want to act as the trustee. Your trustee has the responsibility of managing the trust per your instructions.
The testamentary trust provisions can specify when and how the assets can be used, and the trustee will distribute the assets to the intended beneficiaries based on its terms. For example, you may have a young loved one who legally cannot manage his or her own assets until the age of 18. A testamentary trust would allow your chosen trustee to manage and expend funds for the benefit of the child until he or she comes of age.
Protection for extenuating circumstances
In addition to providing a way to delay inheritance for younger loved ones, testamentary trusts can also protect against unwanted consequences. For instance, if you have a loved one with a disability or special needs who receives government benefits, you do not want a sudden windfall of money to jeopardize those benefits. By creating a trust, you can keep the assets out of the direct ownership of your loved one and protect his or her benefits as a result.
Whether you have young loved ones, one struggling with an addiction, a spendthrift family member, or a loved one with special needs, you can utilize a testamentary trust to leave assets in a way that would benefit them most. Discussing your options with an estate planning attorney can help you better understand how to use this planning tool.