If you are like most in Hennepin, you hear the word “trust” in association with estate planning and likely think of a living trust. However, another lesser known trust also offers a number of unique benefits when it comes to managing your affairs: a testamentary trust. If you are unfamiliar with this type of trust, then you probably also question when and where it might be beneficial to you. The answer depends largely on your level of participation in the estate planning process.
Living and testamentary trusts both provide many of the same protections. The main difference between the two is that, with a living trust, you actually create and set up the trust while you are still alive. In contrast, when you choose to include a testamentary trust in your estate planning, you aren’t actually setting the trust up; rather, you simply include provisions (usually in your will) on how and when the trust should be established.
This lack of control may seem off-putting, yet consider this statistic: The American Bar Association reports that as many as 55 percent of Americans die without even a will. This would suggest that most aren’t inclined to dedicate a lot of time and effort into estate planning. That is exactly what’s required when setting up a living trust. With a testamentary trust, you only need to express your wishes for the trust. The heavy lifting is left to your trustee. Plus, the cost of creating the trust is deferred until your death. Thus, it can be paid for from your estate.
In summary, if you do not have the time, money, or desire to set up a living trust, yet you still want your estate to avoid probate, then a testamentary trust may be for you.