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What is a testamentary trust will?

A testamentary trust will, or will trust, is an individual trust that a grantor (person who created the trust) writes into their will. Although testamentary trusts are created during the writing of a will, they do not come into being until the death of the grantor. A testamentary trust, while seemingly a type of will, is really a simpler and cheaper form of a revocable living trust. However, because this type of trust is created within a will, a testamentary trust does not avoid probate as other types of trusts do.

How Testamentary Trust Wills Work

When the grantor dies, part or all of their assets are distributed to the beneficiaries through these testamentary trusts. While the testamentary trust will be taxed as whole, the beneficiaries of the individual trusts will not be taxed for the devise. This type of will is useful to provide young adults or minors with an inheritance, while at the same time protecting them from spending it all at once.

The testamentary trust, like all other trusts, assigns a trustee who is in charge of distributing the assets in the trust. Sometime the distribution method will be left up to the discretion of the trustee, and sometimes the trust will have specific instructions. It is of utmost important that the grantor assign the trust to a trustee that is trustworthy. The named trustee of the testamentary trust can have many obligations once the trust comes into being.

What Is a Trustee Responsible For?

Aside from distributing the decedents assets, the trustee is generally responsible for decisions involving investment of the trust assets, and paying any taxes due or filing tax returns on behalf of the trust. A testamentary trust also requires annual reporting to a probate court. Depending on how long the grantor wants the assets from the trust distributed to the beneficiaries, these obligations can last for years. Further, a trustee who is inexperienced with any or all of these types of obligations should seek the advice of an estate planning attorney.

Trustees Role in Testamentary Trust Wills

While the trustee is the legal owner of the trust once it comes into being, they have a duty to act in the best interest of the beneficiary of the trust. This means that the trustee may not “invest” the trust assets frivolously, or use the assets to benefit him or herself. The obligation to report to the probate court on an annual basis provides a check on the trustee. This way, the court can monitor the trustees activity with the assets of the trust, and insure that these obligations are not being abused. 

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