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What is a Testamentary Trust?

A testamentary trust is a trust created in a last will and testament. The creator of the trust, also called the grantor, leaves instructions in their will about how their assets should be managed by a trustee and distributed to beneficiaries. After the grantor’s death, the trust establishes itself, hence the name “testamentary.”

Many individuals find it beneficial to create a testamentary trust for minor children or other relatives who will inherit estate assets. A testamentary trust can also be made to manage charitable distributions after death. The grantor can either create separate trusts for each beneficiary to split the assets equally or create a family trust that splits assets based on the needs of each beneficiary.

Creating a testamentary trust may be beneficial for you and your estate plan. If you’re curious about learning more or have any questions, our team of experienced estate planning attorneys can help. Call our law office today at 510-901-5375 for a free consultation.

How is a Testamentary Trust Created?

Once the grantor passes away, the will is verified by a judge in probate court. The court will provide a document called a letters testamentary to the executor of the estate, granting them the power to create the testamentary trust. Once they have been authorized, the executor, who is typically named in the will, establishes the trust. A trustee, who is a separate individual who will also be named in the will, manages the assets in the trust.

In many cases, the assets in a testamentary trust are held until predetermined conditions are met. Most often, this is until young children turn a certain age or reach a certain milestone. The assets in the trust will be managed by a trustee until those conditions are met. Once that happens, the trustee will distribute the assets to the beneficiaries based on the instructions in the will.

The grantor of the trust can name anyone over the age of 18 as a trustee. If you are choosing a trustee, be sure to choose someone who has the best interests of the beneficiaries in mind and can successfully manage the assets in the trust. If you appoint a trustee and they decline, the court can appoint a new one, or someone else can volunteer for the position.

What Are the Main Benefits of a Testamentary Trust?

Testamentary trusts are helpful for many people, but they may not be suitable for you and your estate plan. It’s essential to consult an estate planning attorney before establishing a testamentary trust to ensure it aligns with your financial goals and your future wishes.

The main benefits of a testamentary trust include the following:

  • There are no limits to how many beneficiaries can be named.

  • Parents can distribute their assets evenly to their children.

  • Assets may have more time to grow since the trust is established after death.

  • The assets can remain protected until young children are financially responsible enough to take them over.

  • The instructions in the trust can be changed while the grantor is alive.

  • The cost to establish the trust comes out of the estate after the grantor’s death.

While these benefits are plentiful, there are some drawbacks to creating a testamentary trust as well. The major disadvantages of a testamentary trust include the following:

  • The probate process can take months or even years to resolve, which can delay assets from being distributed to beneficiaries.

  • Assets become public record during the probate process.

  • The trust must be established according to instructions left by the grantor in the will. If any information is missing or vague, it’s possible that the instructions will not be followed exactly according to the grantor’s wishes.

  • Trustees must meet with the probate court once a year until the trust expires. The court fees for these visits can be consequential, especially if the trust doesn’t expire for many years.

What’s the Difference Between a Testamentary Trust and a Living Trust?

A living trust is created by the grantor while they are still alive. In many cases, a grantor will assign themselves as a trustee of a living trust so they can continue to manage their own assets while they are alive. After the grantor passes away, they will typically have a new trustee waiting to be appointed to either manage the assets or distribute them to beneficiaries.

Living trusts can be revocable or irrevocable, but testamentary trusts are always irrevocable. After the grantor’s death, the terms of the trust and the beneficiaries cannot be changed. For many people, this gives them much-needed peace of mind and the guarantee that their assets will be managed and distributed according to their final wishes.

Should I Consult an Estate Planning Lawyer?

Creating a testamentary trust may be a good option for your estate plan if you would like to leave assets to young children after your death. Because testamentary trusts are not established until the grantor’s death, they are attractive for individuals who wish to maintain control over their assets until they pass away. If you already have an estate plan or you are looking to create one, an estate planning attorney on our team can help.

At The Singh Law Firm, we have years of experience assisting clients in creating the right estate plan that meets their needs. We will review your finances and make recommendations based on your current and future goals. If you are interested in creating a testamentary trust, we can draft a legal document to dictate your wishes for the trust after your death that holds up in probate court. For more information about testamentary trusts or any other estate planning tools, call our office today at 510-901-5375.


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