Estate planning can feel overwhelming, especially when unfamiliar terms are involved. One concept that often causes confusion is the idea of the “testamentary trust.” At first glance, it may seem complex or even unnecessary, but for many, a testamentary trust can serve as a useful and strategic component of a comprehensive estate plan. Whether you’re planning for your children’s future, caring for a loved one with special needs, or simply trying to maintain more control over how your assets are distributed, it’s worth understanding how a testamentary trust works. Continue reading and reach out to the knowledgeable Rochester estate planning lawyers here at Lacy Katzen LLP to learn more. Here are some of the questions you may have:
How Does a Testamentary Trust Work?
A testamentary trust is a type of trust that is created through a person’s Last Will and Testament. It does not go into effect while the person is alive. Instead, it is triggered only after their death, and even then, only if the Will specifically directs that the trust be established. In simple terms, it is a posthumous trust that springs into existence only when needed.
This kind of trust outlines exactly how certain assets should be managed and distributed to beneficiaries. The person creating the Will names a trustee, who will be responsible for carrying out the instructions laid out in the document. That trustee might be a trusted family member, a close friend, or even a professional fiduciary or institution.
In New York, a testamentary trust must go through the probate process because it is part of the Will. Probate is the legal process through which the deceased person’s Will is validated and their estate is administered. While this may add some time to the overall administration, the benefits of having a structured trust often outweigh the drawbacks.
What Are the Benefits of Using This Type of Trust?
One of the key reasons people choose to create a testamentary trust is to maintain control over when and how their assets are distributed long after their death. If, for example, you have young children or grandchildren for whom you are leaving a bequest, you may not want them to receive a lump sum inheritance at the minimum legal age of 18. A testamentary trust can provide that distributions are staggered over time, or tie distributions to the achievement of certain milestones, like graduating college or reaching a particular age.
A testamentary trust can also protect assets from being quickly spent, mismanaged, or claimed by creditors. For families with more complex dynamics, such as blended families, beneficiaries with special needs, or those struggling with substance abuse, a testamentary trust provides a level of structure that can safeguard everyone’s interests.
Additionally, if a beneficiary receives government benefits, such as Medicaid or Supplemental Security Income, a properly drafted testamentary trust in the form of a Supplemental Needs Trust is imperative to allow the disabled beneficiary to continue receiving those benefits while still receiving supplemental supports from the trust.
Is This Type of Trust Right for Your Estate Plan?
Every estate plan is unique and personal to you and your family’s circumstances. What works well for one person may not make sense for another. The decision to include a testamentary trust should be based on your family’s unique needs, your long-term financial goals, and your concerns about asset protection and responsible distribution.
Speaking with an experienced Rochester estate planning attorney can help you understand whether a testamentary trust fits into your overall strategy, explain the benefits and limitations of different types of trusts, and help you draft a Will that reflects your wishes in detail.
In the end, a testamentary trust is not about complicating your estate plan. It’s about adding clarity, control, and protection, both for you and for those you leave behind.
If you have further questions or wish to speak with an attorney, please don’t hesitate to contact Lacy Katzen LLP today.
