A testamentary trust is often a useful estate planning device, especially for parents who have young children. Though creating the trust is not especially difficult, you will need to answer several key questions and ensure that your testamentary trust is adequately prepared. Here are three tips that will help you get started in the right direction.
Tip 1. Select the people involved
A testamentary trust gets created through your Last Will and Testament and only takes effect once you die. Like other trusts, you select the property that goes into the trust and who gets to use it. The people who get to use the trust are usually your minor children, known as the beneficiaries. However, you’ll also need to select someone who will be willing to manage the property on behalf of the beneficiaries, known as the trustee. You can also select alternate trustees in case your first choice is unable or unwilling to serve.
Tip 2: Choose the limitations
Unlike direct inheritances, testamentary trusts allow you to place limits on how the trust property is used. It’s very common, for example, for testamentary trusts to dictate that children will inherit part of the trust property at certain ages. For example, you can direct that the children receive one third of the trust property once they reach the age of 18, 25, and 30. Or, you can direct that the children do not receive the trust property until they graduate college.
Tip 3: Formalize your choices
Once you’ve made your decisions about the testamentary trust it’s important to speak your estate planning lawyer so you can be sure your trust is adequately created. You will need to include the terms in your Will and make sure the will complies with all state laws.