Frank had heard about trusts and though he might want to set one up. Researching trusts online just confused him. There were so many types of trusts. However, he did learn enough about living trusts and testamentary trusts to know he wanted to learn more. Frank made an appointment with his attorney to see which one might be right for him.
What’s the Difference?
It comes down to when the trust is actually established.
A testamentary trust is established by an individual’s Last Will and Testament (the Will). The person who signed the Will, the testator, does not create and fund the trust during his or her lifetime. Instead, the trust is set up when the testator’s Will is probated.
The term “living trust” says it all. Also called an inter vivos trust, a living trust is established while the grantor is still alive.
Testamentary Trust Details
This type of trust offers most of the same advantages of any trust. For example, many trusts are used for asset protection. A testamentary trust can be set up to protect an estate from its heirs’ frivolous financial behavior. Giving some beneficiaries a large lump sum inheritance is a recipe for disaster.
More than one testamentary trust can be set up through a Will. For example, Frank might want to set up one trust for his son and one for his daughter.
The trustee of a testamentary trust acts like any other trustee. In other words, the trustee manages the trust assets. Heirs are not always ready to manage assets passed down through a Will. The trustee can distribute trust assets according to the terms of the trust, but also keep an eye on the beneficiaries.
Beneficiaries may enjoy some important tax advantages by receiving their inheritance through a testamentary trust instead of a lump sum. Distributions may be spread out to minimize the tax burden.
Still Have Questions About Using a Testamentary Trust?
Frank decided that a testamentary trust was right for his estate based on his attorney’s advice. If you are interested in establishing a trust, contact a qualified Alabama estate planning attorney today.
The attorneys at Miller Estate and Elder Law assist their clients with all phases of estate planning. For a free consultation, contact us at 256-251-2137 or use our convenient Contact Form. Although we’re located in Anniston, we also help clients in the Birmingham, Gadsden, Hoover, Talladega, Vestavia Hills, and surrounding areas.
