A testamentary trust is a type of trust created by a will upon the death of the grantor. The grantor is the person who creates the trust, and the trust is formed when the will is executed. The will typically names one or more trustees who will handle the trust funds and assets, and the grantor will also name a beneficiary or beneficiaries who will receive the trust’s distributions.
This type of trust is commonly used to protect property from being distributed to heirs prior to the beneficiary reaching a certain age or attending college. It also allows the grantor to protect assets from creditors or tax implications. Testamentary trusts are commonly used by parents to help provide for their children. Upon the death of the grantor, the trustee will hold the trust assets until the beneficiary reaches a certain age or meets certain conditions, depending on how the trust is set up.
An important factor in setting up a testamentary trust is the choice of trustee. The trustee not only must manage the trust assets, but also must be willing to carry out the wishes of the grantor and serve as a fiduciary to the trust’s beneficiaries. For this reason, it is important to choose a trustee who is qualified, trustworthy, and able to understand the terms of the trust.
Understanding the fundamentals of testamentary trusts is essential for business professionals. Creating a trust is a powerful way to protect assets and make sure that the grantor’s intentions are carried out after death. It is important for business professionals to speak with legal counsel and become educated on this topic.