A trust is among the most common additions to the average estate plan. As such, the time may come when you consider adding a trust to your estate plan. Deciding which type of trust is best for your needs, however, can be difficult. An Overland Park trust attorney at Parman & Easterday helps you decide if a testamentary trust is right for you.
Why Your Last Will and Testament May Not Be Enough
For most people, a Last Will and Testament serves as their initial estate planning document and continues to provide the foundation for their estate plan as that plan grows. While your Will can accomplish the distribution of your entire estate, you will find that it is no longer enough once you become a parent. The reason for this is that your minor children cannot inherit directly from your estate. Therefore, assets gifted to a minor in a Will must be managed by an adult until the child reaches the age of majority. The problem is that you lose the ability to decide who that adult is if you rely on your Will to pass down assets to your minor children. This is the primary reason why parents of minor children choose to establish a trust in addition to their Will.
At its most basic, a trust is a relationship by which property is held by one party for the benefit of another. A trust is created by a Settlor, also referred to as a Trustor, Grantor or Maker, who transfers property to a Trustee. The Trustee, appointed by the Settlor, holds that property for the trust’s beneficiaries. A successor Trustee is also customarily designated. A trust beneficiary can be an individual, an entity (such as a charity or religious organization), or even the family pet. A trust may also have numerous beneficiaries at the same time as well as both current and future beneficiaries. All trusts fit into one of two categories – testamentary trusts or living (inter vivos) trusts. Testamentary trusts are created by a provision in the Settlor’s Last Will and Testament and do not become active during the lifetime of the Settlor. Conversely, a living trust, is created during the Settlor’s lifetime.
When Is a Testamentary Trust the Best Choice?
A testamentary trust can provide a number of benefits to the parents of minor children. As the Settlor of the trust you appoint the Trustee and any successor Trustees. By doing this, you decide who will protect and manage your children’s inheritance. The trust lets you decide when your children will receive their inheritance – all at once or staggered over time. No matter how mature a child may be, handing an 18-year-old a large lump sum inheritance is rarely a wise idea. Instead, you may wish to direct the trust to distribute that inheritance in increasingly valuable disbursements over the course of several years to allow your child an opportunity to learn to handle his or her finances.
Using a testamentary trust offers the added benefit of being practical and economical. If your primary goal is to guard your minor children’s inheritance, you may only need the trust if you pass away while they are still minors. If so, there is no advantage to activating the trust during your lifetime and incurring the expense of administering the trust. You will still retain the peace of mind of knowing the trust will activate in the event of your death.
Contact an Overland Park Trust Attorney
For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about creating a testamentary trust, contact an experienced Overland Park trust attorney at Parman & Easterday by calling 405-843-6100 or 913-385-9400 to schedule your appointment today.
Yes, you can. If you establish a living trust, however, you must fund it and administer it during your lifetime. If you are going to do that, you may wish to consider using the trust for additional goals, such as incapacity planning.
You can appoint anyone; however, it is best to appoint a Trustee who has a financial and/or legal background given the complex nature of trust administration.
As the Settlor of the trust, you create the trust terms. As such, you decide when the assets are distributed to your children. You can also give your Trustee as much discretion as you wish to make distributions.