Many people believe that a last will and testament will cover most, if not all, of their estate planning needs. While that may be true in some cases, for some people, a testamentary trust could be exactly what they need in order to protect their assets and ensure their loved ones will be taken care of. But what are testamentary trusts, and how can you use them as part of your estate plan?

What is a Testamentary Trust?

    A testamentary trust is a type of legal arrangement where one person (known as the grantor or trustor) gives their money or property over to another person (known as a trustee) who manages it on their behalf. Like other types of trusts, trustees of testamentary trusts have the duty of taking care of the assets in the trust on behalf of its beneficiaries. Unlike other trusts, however, a testamentary trust only comes into being when its grantor is deceased, distributing the assets to beneficiaries named by the grantor.

How Does a Testamentary Trust Work?

    When the grantor of a testamentary trust dies and probate is filed, the testamentary trust “springs to life.” After that point, the trustee is responsible for ensuring the assets in the trust are appropriately managed on behalf of the grantor’s beneficiaries, which are the grantor’s heirs. In the case of adult beneficiaries, this usually means simply distributing the assets in the trust as the grantor’s wishes dictate. In the case of children, a trustee may be responsible for managing the trust until they are old enough on their own.

What Are the Benefits of a Testamentary Trust?

    One of the biggest benefits of testamentary trusts is that they keep creditors at bay, meaning that they cannot easily take money out of the trust to satisfy any debts you may have had. In addition, money and property held in a trust is exempted from many kinds of taxes, including the estate tax and gift tax. This means that you could save your assets from being taken by creditors or tax collectors, ensuring you can pass them on to your loved ones instead.

Is a Testamentary Trust Right For You?

    Testamentary trusts are, sadly, not for everyone, but many people trying to plan their estates may find one of these trusts may suit their needs. To understand what may work best for you, however, you should speak to a lawyer with experience handling trust formation and estate law. They can help you to understand the potential pros and cons, and decide what works best for your needs.

    The estate planning attorneys at David J. Lorber & Associates, PLLC will work with you to come up with a plan that protects your interests and ensures that you and your loved ones are taken care of. For comprehensive estate and elder law services in New York, call David J. Lorber & Associates, PLLC at (631) 750-0900 or contact us online to schedule a free consultation at our Setauket office.

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