Testamentary Trust to be Incorporated Into a Will

Friday, February 5, 2021

    Often a person wants to leave property in his or her Will to a child.

    Most people expect that they will not die in the next few years when they are making a Will, but they also want to plan for the possibility that they might die unexpectedly in an accident (or a pandemic).

    When the expected beneficiaries are currently children (or when they are below what the person thinks of as the age of discretion, even if the children are 18 or older), it can be important to put a Trust into place.

    While some people choose to have a Trust (often called a Revocable Living Trust) as part of their regular estate plan, other people prefer to avoid the cost and complexity of doing this.  This is particularly true for younger folks who really do not expect to die before significant changes in their life.

    Young parents are often a prime example of such folks.

    On the other hand, when these folks think of the possibility that they might die unexpectedly, leaving young children as their heirs, they often are uncomfortable with the idea that these young children would need a conservatorship (with all the expense and inconvenience this entails), and then that ALL the money would be transferred to the children, with no strings attached, and no safeguards in place, immediately upon each child’s 18th birthday.

    Most people, looking back at their own early years, or at least at their class mates in high school, think it would be a bad idea for a person to receive their full inheritance immediately upon turning 18 (or 25 in some circumstances).

    Having a Testamentary Trust can be a good middle ground.

    A Testamentary Trust is a Trust that is incorporated into a Will.  It comes into effect if the person making the Will dies before the beneficiaries of the Will have reached whatever age the person thinks is appropriate for the children to have money in their own name, with no restrictions.  

    This allows safeguards and a responsible adult to manage funds until the child reaches some age past 18 (or 25), while still allowing disbursements for things that the Trustee thinks are reasonable prior to that age.  Distributions can be made, if the Trustee thinks it appropriate, for education, a house, a business, or travel, among other things, while still protecting the bulk of the assets from spending that the Trustee thinks are inappropriate given the circumstances that exist in a future that the person making the Will can only speculate about in advance.