What Is a Testamentary Trust?
There are two categories of trusts. One is a trust you create during your lifetime and to which you then transfer assets. This is referred to as an inter vivos trust or living trust. The other type of trust is created at death by a person’s will. All of the terms for this trust are included in the will, but the trust doesn’t “spring” into existence until the person who wrote the will dies. This type of trust is referred to as a testamentary trust.
Upon the Grantor’s Death, Why Do Assets in the Testamentary Trust Go Through Probate?
Assets in a testamentary trust go through probate because the trust is created by a will, and all wills are required to go through probate. Probate is a proceeding, in which a court determines the validity of a will, and once found valid provides for the distribution of the decedent’s property according to his or her will. Since the decedent did not create a trust during his or her lifetime and transfer property to it, probate is required in order for the court to order the decedent’s property transferred to the testamentary trust established in his or her will.
For example, assume I have a bank account with my name on it, and my will says that at my death I leave that bank account in a trust for the benefit of my children. The trustee named in my will could go to the bank with a copy of my will and ask the bank to transfer the account to the trust referred to in my will. But the bank won’t do that until it receives an order from the probate court determining that my will, and the trust it creates is valid. Accordingly, that account must still go through probate before it can be transferred to the testamentary trust created in my will.
Why Might Someone Decide to add a Provision of Testamentary Trusts to Their Will?
Trusts provide many benefits. If property is left at death to minor children, a trust can provide for the proper management and use of that property until the children reach an age of financial maturity. Trusts can also be used to protect and properly provide for a surviving spouse. Trusts are also popularly used to protect child a child’s inheritance from lawsuits and financial difficulties or to prevent the child’s inheritance from being lost to the child’s ex-spouse in the event of a failed marriage. So there are many reasons a person might want to create a testamentary trust in his or her will.
A person could also reap these benefits and avoid probate by creating a trust during his or her lifetime and transferring property to it as opposed to creating a testamentary trust in his or her will. But many times people will feel they don’t have enough to warrant a lifetime trust or don’t want the additional responsibilities that go with a lifetime trust.
For more information on Testamentary Trusts, a free initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (314) 542-2210 today.
Get your questions answered - call me for your free, 20 min phone consultation (314) 542-2210