What is a Testamentary Trust?
A testamentary trust is a dormant trust created in a Will. It lies dormant until the death of the person creating it springs it to life.
Unlike a trust that you create and fund during your life, such as a revocable trust or an irrevocable trust, a testamentary trust does not hold any assets until after you die.
Your Will may contain several testamentary trusts for various beneficiaries. For example, you can create a testamentary trust for the benefit of a spouse, children, or a disabled relative.
Leaving assets in trust for beneficiaries gives you the opportunity to appoint a trusted friend or family member to manage a beneficiary’s inheritance. The trust’s terms provide instructions to the Trustee concerning how and when to distribute trust funds to a beneficiary.
What are the Benefits of a Testamentary Trust
It is always possible to make an outright distribution to a beneficiary; however, testamentary trusts offer multiple benefits:
- They allow you to select someone you trust to manage assets for a beneficiary so that funds can be distributed according to your wishes.
- They typically contain spendthrift language that prohibits a beneficiary from selling, giving away, or otherwise transferring his or her interest in the trust assets. This provides a beneficiary with asset protection that would not be available with an outright distribution.
- They allow you to control who will receive the assets remaining in the trust after the beneficiary dies.
How Long Does a Testamentary Trust Endure?
A testamentary trust can be created to last for a finite number of years or for the lifetime of the beneficiary.
For example, a testator can specify that the trust will terminate after a beneficiary attains a particular age when they would have the maturity and experience to manage those assets. A testamentary trust can also last for the lifetime of the beneficiary.
That doesn’t mean that the beneficiary can never have control of the trust. In fact, you can allow a beneficiary to elect to be a co-trustee or sole trustee when the beneficiary attains a particular age.
Does a Testamentary Trust Avoid Probate?
A testamentary trust in a Will does not avoid probate. Wills go through probate because probate is the process of validating a Will.
During the probate process, an executor gathers a decedent’s assets, pays off enforceable death, and transfers assets to the decedent’s beneficiaries in accordance with the Will. If you have created a testamentary trust, your executor will fund the trusts you create during probate.
February 16, 2018 at 8:20pm
Thank you for providing this site. I am just reviewing my latest will and living trust, which were created 11 years ago. I have understood more and more as I looked thru both of them again and again this past week. Your site and the language in it have helped me even more. Thank you.
February 23, 2018 at 7:00pm
Thanks for stopping by. I’m glad you find the information on my site helpful!
June 21, 2018 at 6:27pm
What about a testamentary trust for a spouse the is incapacitated. Where can I find an example or information regarding that.
June 26, 2018 at 11:27am
It is possible to create a testamentary special needs trust for an incapacitated spouse. An estate planning lawyer should be able to assist.
August 9, 2018 at 1:22am
When there is only one sole beneficiary, what happens when the trustee dies if the original will did not designate the beneficiary control? Does the beneficiary have any rights to control the trust?
August 10, 2018 at 5:47pm
If no alternate trustee is named and the Will does not grant a beneficiary the right to control the trust, then a court can appoint a successor.
February 22, 2019 at 6:34pm
Hi Rania – thanks for the great info. As I understand it, I have testamentary trust created by my grandma in her will. She expired and the will appoints me as Trustee for trusts for my adult siblings. The will has been probated. Am I now required to create a trust legal document or instrument of some sort? Or just file for tax id numbers for each trust and open appropriate investment vehicle accounts (annuity, bonds, etc)?
Also, I read in another article that with testamentary trusts, the Trustee is required to see the probate court regularly to ensure proper handling of the trust according to the will instructions. Is this so in Texas. If yes, do I continue to see probate court in county it was probated?
April 24, 2019 at 6:13pm
Hi Tina. I recommend that you consult with your probate attorney about your next steps. Provisions relating to the testamentary trust should be included in the Will and should not require additional trust documents. It will be necessary for you to obtain tax identification numbers for each trust and open appropriate accounts. In Texas, trusts are generally administered free of court supervision.
May 5, 2019 at 7:17pm
Can you deed your real property into your Testamentary Trust to avoid Probate?
Also can you deed your real property into a Special Needs Trust to avoid Probate?
May 6, 2019 at 10:50am
A testamentary trust created in a Will comes to life after the Will has been probated. Therefore, deeding the real property to the testamentary trust will not avoid the need for probate.