A trust is an agreement under which a trustee holds property for the benefit of a beneficiary. Trusts can differ greatly in how they are created, what terms govern their operations, and so on. Trusts that are created through instructions left in your Will are known as testamentary trusts. For those with young children, this type of trust is a low-cost way of ensuring that their needs will be met, and their inherited property is managed responsibly in the event that both parents die before the children turn 18.
Care for Children
As opposed to outright distribution of an inheritance to an adult beneficiary, in the event that both parents die and intend to leave property to their minor children, the property must be managed for them under some kind of fiduciary arrangement. Consequently, it should not be assumed that an estate is too small to justify setting up a trust for minor children.
As is the case for all trusts, significant consideration should be given to the trustee appointment and powers. The same individual who might serve as the guardian of a minor’s estate can be selected as a trustee and would probably serve more easily and flexibly under a trust or as custodian of a testamentary custodianship.
There are several advantages to setting up a testamentary trust versus other arrangements for minor children. Under a guardianship for example, minors receive property and the ability to manage the funds at the age of 18. Distribution at such an early age can be avoided by using a testamentary trust. The trust can be structured in a way which defers termination until the child becomes 21 or 25, or even at such time as it appears to the trustee that the child has completed their education. Distribution of the remaining funds to all beneficiaries can (and often should) be deferred until youngest child has attained the required age or circumstances specified within the will.
Flexibility and Cost
Testamentary trusts are created through instructions provided within your will – which means it can be updated at any time based on the changes in circumstances. The executor of an estate – the person administering the will through probate – is instructed to create the trust if certain conditions that are met.
Additionally, because the trust isn’t formed until your death, the cost of creating the trust can be paid out of the estate – saving the upfront cost and efforts that go along with creating a different type of trust.
Russell Law Offices, S.C. can help you navigate this process efficiently and effectively. Call the office today to schedule your consultation with one of our Estate Planning attorneys.