What is a Testamentary Trust?

If you are thinking about planning your estate, you may already know the benefits of having a will. However, it is important to know the tools you have available to you for estate planning beyond executing a simple last will and testament. One such tool is known as the testamentary trust, and depending on your needs, it can be an essential part of your estate plan.

A trust is a legal arrangement where you entrust someone else (known as the trustee) with your money or property, on the condition that they care for that money or property on behalf of yourself or a third party. The trustee has a legal duty to make sure the money or property is secure, and if they invest any money in the trust, they need to make sure that their investments are reasonable and made with care (and not simply used for self-enrichment). For this reason, if you are creating a trust, it is important to select a trustee you know you can… well, trust, especially in the case of a testamentary trust.

A testamentary trust is a kind of trust that is created for the express purpose of disposing of your money or property after you die and provides for additional protections to your beneficiaries. A testamentary trust allows you to set aside funds to be managed and used specifically for certain benefits, such as a beneficiary’s medical or educational expenses. A testamentary trust can be set up to withhold full and outright distributions to a beneficiary until the beneficiary reaches a certain age, which is advisable if you have or may have beneficiaries (such as grandchildren) who might still be minors at the time of your passing.  Another benefit is that property in a trust can be protected from a beneficiary’s creditors.

However, a testamentary trust is not necessarily appropriate for every situation, and it is important to get legal advice when planning your estate. The attorneys at Hunziker, Jones & Sweeney, P.A., will help you put together an estate plan that is right for you. Just send us an email at info@hjslawoffice.com (or use our contact us form), and we will reply as quickly as possible. You can also reach us by phone at (973) 256-0456.

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