Creating an estate plan that best serves the creators, as well as the beneficiaries, can be confusing and overwhelming; however, it is important, especially for young parents, to have the right plan in place. One simple way to provide for children throughout their lifetime is by setting up a testamentary trust in one’s last will and testament.
While most testamentary trusts are easy to set up and do not require an extensive estate plan, it is important that its creators understand all its aspects and consider all options. At Sobon Law LLC LLC, we work with parents to create a plan that fits the parents and children needs, having all parties’ best interest in mind.
A trust is a legal entity that allows you to transfer your assets to future heirs. A testamentary trust is set up in a Last Will and Testament making it easy and less expensive to set up, compared to an inter-vivos trust. Within the will, the creator can include instructions on how the trust should be established, what assets should go into the trust, as well as naming its trustees and beneficiaries.
Benefits of Testamentary Trust
The major benefit of a testamentary trust applies especially to parents with young children. They might not have an estate so big that it requires a set-up of more complex estate planning, such as an inter-vivos trust, but they understand the importance of estate planning and wish to create a trust for their children’s benefit. A testamentary trust will create that protection, since it is up to the parents to decide who should look over the assets until the children receive their distributions. The trust will not only protect the assets until children are old enough to make responsible financial decisions, but it will also protect it from potential legal actions against the beneficiary.
Also, there is also no limit on how many trusts or beneficiaries can be included in a person’s will, giving parents flexibility to create separate trusts for each child.
Considerations When Setting Up a Testamentary Trust
The terms, instructions, assets, and trustees of a testamentary trust can be modified as much as one wishes, during the creator’s lifetime since it does not go into effect until after the testator (the party creating the will) passes away and the last will and testament is put in the probate process. A testamentary trust also will not avoid probate since it only goes into effect after the will is probated.
One of the most important parts of creating a testamentary trust is choosing a trustee. A trustee is the person responsible for creating and handling the trust until all the assets are distributed to its beneficiaries. The trustee will have several responsibilities, including handling the paperwork after the testator’s death, as well as making distributions to the beneficiaries for a few years to provide for their well-being, health, or education. Because a trustee is a party who will have the most control over the assets in the testamentary trust, it is crucial to choose a person that will have the beneficiary’s best interest in mind. Some testators may consider choosing co-trustees to create a greater protection for the assets, since two or more people must agree to make distributions not specified in the trust or changes to the trust.
There are many different options available for parents to plan for their children’s future, at Sobon Law, LLC we can guide you in making the right decisions. Call today at (216) 586-4246, to schedule a consultation.