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A testamentary trust Will sets up one or more trusts that part or all of your estate assets will go into at the time of death. Like all other Wills, it leaves your estate, or part of your estate, to your beneficiaries. In the case of a testamentary trust Will, one or more of the beneficiaries is the Trust itself. The assets (or part of them) go into the trust for beneficiaries named in the Trust. Multiple testamentary Trusts can be established in a Will.

The trustee of the Trust is sometimes the executor of the Will, but not always. The terms of the Trust can provide for payment of income or turning over property to the beneficiaries of the Trust, with distribution either fixed in the Will or left to the discretion of the trustee.

Although the beneficiaries have an interest in the Trust, the trustee is the legal owner of the property held in the Trust and has the legal authority to manage the assets. The trustee’s obligations include investment decisions and preparing and filing tax returns on behalf of the Trust.

A testamentary Trust created by a Will has no power or effect until the Will of the grantor (deceased) is probated. Unlike some other Trusts, this type of Trust does not avoid the need for probate, but it can accomplish other estate planning goals. For example, a testamentary Trust can be used to reduce estate taxes on the death of a spouse or provide for the care of a relative or a disabled child. Many parents set up a testamentary Trust to ensure their minor children, in the name of a guardian, receive a steady income. Since the Trust is considered its own entity, the Trust itself will be taxed separately from the beneficiaries and beneficiaries will not be taxed individually.