It’s not uncommon for a decedent’s heirs to question how they’re going to keep on going once their loved one dies. Death is especially difficult for minor heirs. They may be prone to burning through what you leave them unless you put something in place to make sure that they utilize their financial resources responsibly. A testamentary trust can ensure that your final wishes are carried out as you’d hoped once you’ve died.
A testamentary trust is a trust that goes into effect upon the testator’s death. It can be set up simply by you drafting your will.
It’s in your will that you’ll need to designate which assets should be placed into the trust upon your death. You should know that you don’t have to place everything into it though. You can establish more than one testamentary trust too.
Some of the steps that you must take to create a testamentary trust include deciding what you’re going to place into it, naming the trustee and beneficiaries and drafting the terms and conditions for it.
There is a difference between a living trust and a testamentary trust. A testamentary trust goes into effect once the creator of it dies. A living trust goes into effect the moment someone establishes it.
A living trust can be revocable, or modifiable, or irrevocable, which means it cannot be altered. Any details surrounding the testamentary trust including named trustees or beneficiaries, assets placed into it or the terms of it can generally all be changed up to the time of the testator’s death. The terms and conditions become irrevocable once that individual dies.
One advantage of setting up a living trust is that it avoids the probate process. The reason why a testator avoids this because they transfer their assets into the trust while they’re still alive.
A testamentary trust is much different though. A decedent’s assets must still go through the probate process since they remain in the testator’s control up until their death.
Trusts can be very complicated. There are a lot of factors including tax implications that testators must weigh before setting one up. An experienced trusts attorney here in Sacramento can advise you of the pros and cons associated with setting up this type of asset protection or probate-avoidance tool here in California.