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Testamentary Trusts

What is a Testamentary Trust?

A testamentary trust is a trust incorporated in a last will and testament or revocable living trust which provides for the distribution of all of some of an estate after the death of the testator (will) or settlor (revocable living trust). Typically, these type of trusts are created for tax planning, gifts to young children or relatives with disabilities, or others who will inherit a substantial amount of money upon the testator’s passing.

How is a Testamentary Trust Created?

A Testamentary Trust is not funded until after the death of the person creating the trust. The will or revocable trust will include a provision that a certain gift should be made to the testamentary trust at the time of death. After the period of administration is complete, the executor of the will or the trustee of the revocable trust, will deliver the gifted assets to the trustee of the new testamentary trust. The trustee is fiduciary who has the legal responsibility to properly manage, invest and distribute the trust assets according to the instructions and directives provided in the document. A testamentary trust can be set up for a set period of time, such as until the beneficiary attains age 25, gets married, or graduates from college; or it may be for the lifetime of a beneficiary, such as a tax-savings bypass trust for the surviving spouse, or an asset protection lifetime descendants trust for a child. Testamentary trusts work great for asset and creditor protection purposes, or to provide protection from bad marriages.

How is a Testamentary Trust Different From a Living Trust?

The primary differences between a testamentary trust and a living trust is when the trust goes into effect and if it’s subject to probate in court. Living trusts go into effect after they’ve been funded and right away after they’re established. Testamentary trusts go into effect after the grantor passes.

Retain Legal Counsel From Our Montgomery County Estate Planning Attorney

At Dossey & Jones, PLLC, we have been helping Texas residents prepare their estates for the future. We can discuss the many different types of trusts available and can help you determine which is best for you and your family. Let us assist you with establishing a bright future for your loved ones.

Contact our Montgomery County estate planning firm as soon as possible to get started!

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