By Robert Chang, Esq
Freelance Writer
A testamentary trust definition is a trust that will become effective when the person creating the trust has died. When these are created, specific instructions can be made before the assets are transferred to the trust beneficiary.
Common examples are trusts that are supposed to be maintained by a trustee until a child turns 18 years old or until they complete certain desired milestones like graduating from college.
Creating a Testamentary Trust
A testamentary trust, unlike other trusts, is not legally binding until the person has died. As such, a person must include the trust in their will so that it is created upon death.
When you draft a will, it is a good idea to include the creation of a testamentary trust. Probate will still take place. This is to make sure the assets are being managed appropriately.
It is easier to include the testamentary trust clause that creates the trust when you are creating a will – however, if you already have a will, you can always amend the will to include the testamentary trust clause.
Distributions of a Testamentary Trust
The trust can be simple or complicated depending on each individual. Both assets and income can be distributed. A common example is to have a trust asset be invested and for the interest or non-principal gains to be distributed monthly to the beneficiary.
Portions of the trust can be distributed as certain requirements are met. For example, a beneficiary may get one third when he turns thirty five years old, and he would get two thirds when he graduates from college.
Finally, one of the most important part of a trust is choosing a good trustee. Although not fatal to the trust, it is a good idea to have someone you trust be responsible for the assets and income.
This article contains general legal information and does not contain legal advice. DP Legal Solutions is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please consult with a lawyer.