Testamentary Trusts: Trusts Created as Part of a Will
What is a Testamentary Trust?
A testamentary trust is a trust that is created within a person’s last will and testament and becomes effective only after their death. Unlike a living trust, which is established and managed during your lifetime, a testamentary trust is set up through your will to control how your assets are distributed to your beneficiaries. These trusts are often used when the maker of the will does not want a beneficiary to receive their entire inheritance outright. Instead, the inheritance is held in trust until certain conditions — such as reaching a specific age, completing education, or achieving another milestone — are met.
At Favret Law, we have extensive experience drafting testamentary trusts and guiding trustees and families through the probate process. We can help you understand whether a testamentary trust is right for your estate plan and how it can protect your loved ones.
Why Create a Testamentary Trust?
A testamentary trust can be an important estate planning tool for:
- Young Beneficiaries: Preventing minors or young adults from receiving a large inheritance before they are mature enough to handle it responsibly.
- Special Needs Beneficiaries: Protecting government benefits for a disabled loved one while still providing for their needs.
- Blended Families: Ensuring assets are held and distributed according to your wishes, especially in second marriages or complex family situations.
- Asset Protection: Providing oversight for how funds are used and protecting the inheritance from creditors or mismanagement.
By including a testamentary trust in your will, you can direct when and how your beneficiaries receive their inheritance and appoint a trustee to manage the trust assets.
How Testamentary Trusts Work
Because a testamentary trust is created by a will, it is supervised by the probate court. This means:
- The trustee named in the will must file an application with the probate court and be formally appointed before they can act on behalf of the trust.
- The trustee is required to file periodic reports with the court detailing the trust’s financial transactions, including distributions, investments, and expenses.
- Depending on the size and complexity of the trust, the trustee may also be required to file trust income tax returns.
This court supervision adds a layer of accountability and transparency, but it can also be complex and time-consuming for trustees to manage without professional guidance.
Trustee Responsibilities and Risks
Serving as the trustee of a testamentary trust is a serious responsibility. The trustee is legally obligated to manage the trust assets prudently and in accordance with the terms of the will. Common trustee duties include:
- Collecting and safeguarding trust assets
- Making approved distributions to beneficiaries according to the trust terms
- Properly investing and managing the trust property
- Filing required tax returns and court reports
- Keeping accurate records of all trust transactions
If a trustee makes distributions not authorized by the will, fails to invest assets prudently, or does not properly protect the trust property, they could be held personally liable. This is why many trustees choose to work with experienced probate and trust attorneys like Favret Law to ensure compliance with all legal requirements.
How Favret Law Can Help
With over 30 years of experience in probate law, estate planning, and trust administration, Favret Law has guided countless families and trustees through the complexities of testamentary trusts. Our services include:
- Drafting testamentary trust provisions in your will to ensure your wishes are honored
- Advising trustees on their legal duties and helping them avoid personal liability
- Preparing and filing required reports with the probate court
- Assisting with trust tax filings and accounting obligations
- Representing beneficiaries and trustees in trust-related disputes
Whether you are planning to create a testamentary trust or have been named as a trustee, we can provide the legal guidance and support you need.
Plan Your Testamentary Trust with Confidence
A testamentary trust can be an effective way to protect your assets and ensure your loved ones are provided for according to your wishes. However, because these trusts are supervised by the probate court, they require careful planning and administration.
Contact Favret Law today to schedule a consultation. Our experienced attorneys can help you design a testamentary trust that fits your unique needs or assist you in fulfilling your duties as a trustee.
