Although your initial estate plan may consist of nothing more than a simple Last Will and Testament, you will undoubtedly want to expand on that plan as your life becomes more complex throughout the years. A common addition to the average estate plan is a trust agreement. If you decide to create a trust you will need to choose to create a living trust or a testamentary trust. To help get you started, the Long Island trust attorneys at Eghrari Wealth Training Firm discuss why you might want to include a testamentary trust in your estate plan.
Trust Agreement Basics
A trust is created by executing a legal document known as a trust agreement. A trust agreement creates a legal arrangement wherein assets intended for the benefit of a third-party are managed by someone appointed by the trust creator to be the Trustee in the trust agreement. The person who creates a trust is referred to as the “Settlor,” “Grantor,” “Trustor,” or “Maker.” There are two basic types of trusts: living trusts and testamentary trusts. A living trust activates during the lifetime of the Settlor once all the formalities of the trust creation are complete. A testamentary trust, on the other hand, does not activate until after the death of the Settlor and is created through a provision in the Settlor’s Last Will and Testament. A living trust can be revocable or irremovable. Because a testamentary trust is not legally created until after the death of the Settlor, a testamentary trust becomes irrevocable once it activates. Of course, because your Will can be revoked or modified up to the time of your death, you can revoke or modify a testamentary trust before it becomes active.
Reasons to Choose a Testamentary Trust for Your Estate Plan
All decisions relating to the creation of a trust, including which type of trust to create, should be made with the advice and guidance of an experienced estate planning attorney. It does help, however, to learn more about your trust options to help you decide if a testamentary trust is right for you and your estate plan.
A testamentary trust is a common estate planning choice made by parents who have young children. The law does not allow a minor child to directly inherit assets of any kind. For a parent, that means that an adult must manage an inheritance intended for a child until the child is old enough to directly inherit the assets. As a parent, you understandably want to decide who manages the inheritance you pass down to your child(ren). Creating a trust allows you to do just that by appointing the Trustee of the trust. If, however, you only need such an arrangement to exist if something happens to you, there is no reason to create a living trust. There are expenses involved in the administration of any trust. Unless you need the trust to be active while you are alive, you want to avoid those expenses. Creating a testamentary trust gives you the benefit of choosing who will manage the inheritance you pass down to your child(ren) without the extra expenses involved in administering the trust while you are alive. In essence, including a testamentary trust in your estate plan allows you to protect and provide for your child(ren) if something happens to you while they are young without incurring unnecessary expenses if nothing does happen to you.
Contact Long Island Trust Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about why you might want to include a testamentary trust in your estate plan, contact the Long Island trust attorneys at Eghrari Wealth Training Firm by calling us at 631-265-0599 to schedule your appointment.