NewsNot everyone wants to leave heirs with unfettered access to the wealth they’ve accumulated over the course of a lifetime. Some people want to put restrictions on when or how money is used. Others hope to protect an inheritance from being scooped up by creditors or diverted away from children by a second wife or husband.
In all these cases, a testamentary trust can be a useful estate planning tool. What’s more, it makes it possible to leave assets to minor children who may not be able to legally possess or manage them on their own.
Keep reading to learn all about testamentary trusts, how to set one up and why some experts say they have fallen out of favor.
What Is a Testamentary Trust?
Trusts are created to hold assets, and money in a trust is managed according to the wishes of the person who created it.
“A testamentary trust is created in a last will and testament,” explains Neil V. Carbone, an estate planning attorney and partner with Farrell Fritz in New York City.
The trust doesn’t come into existence until after a person dies and the will has been validated by probate court. Once the trust has been created, a person’s assets are placed into it and then distributed as designated by its legal documentation.
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What Is a Testamentary Trust and How Do I Create One? | Family Finance | U.S. News (usnews.com)