When thinking about your estate plan, do you become nervous about what your young children or grandchildren might do with their portion of their inheritance? Perhaps it took you a lifetime to build up a legacy for your family, and you fear that your 18-year-old grandson might take much less than a lifetime to squander what you worked so hard to build. One way to handle such fears in your estate plan is to create a Testamentary Trust. A Testamentary Trust is different from a Revocable Trust in that it is created as part of a Will and “springs to life” after the death of the Testator, (the individual for whom the Will was written). A Revocable Trust begins to function at the time it is signed and executed by the Settlor (the Trust creator). Testamentary Trusts can help manage the situation described above by allowing the Testator to maintain control over how and when assets will be distributed after death.
When a Will is drafted, the Will can include a Testamentary Trust. The Testamentary Trust can then control the age at which portions of the estate will be distributed to people named in the trust. The Testamentary Trust also names a Trustee who will manage the assets until the beneficiaries (persons who “benefit” from or receive assets under a trust) reach the age indicated by the Testator. The beneficiary could still benefit from the assets, but it would be at the discretion of the Trustee.
For example, imagine that Thomas is a grandfather to twins Billy and Ben. Thomas has worked for years to establish and maintain a legacy for his children and grandchildren to inherit. Billy and Ben are 17 years old, and Thomas would love to see them graduate from high school, be accepted to a university, and attain a high level of education. Billy and Ben have other plans at the moment. Billy has a band with his friends and feels that he has a great shot at making it big in the music market, but he just needs a little money to buy equipment and a van for road tours. Ben has done very well in football and feels he could be a professional football player. Thomas loves and supports his two grandkids, but doesn’t see Billy making billions in his band and doesn’t think Ben will even make the Bengals’ bench.
What can Thomas do? One option available to Thomas as a Testator is to set ages at which Billy and Ben can receive assets as Beneficiaries. He can do so in a Testamentary Trust under his Will. Thomas decides to have a Trustee manage the assets Billy and Ben would otherwise inherit under the Will with special instructions to make discretionary distributions for education. Thomas also decides that once Billy and Ben reach the age of thirty, they will likely have determined whether their sports and music dreams are realistic, or whether their grandfather’s legacy can be put to better use elsewhere.
If you have similar issues and concerns, we are here to help. We will sit down with you and discuss the estate planning options that are available to you. Don’t hesitate to visit our website or call 719-687-2328.
* This is not considered legal advice, and the legal system constantly changes. If you want current and accurate legal advice, please contact our office and arrange to speak with an attorney. 719-687-2328