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How can families benefit from a testamentary trust?

On Behalf of | Apr 17, 2024 | Estate Planning |

As the owner of an estate or testator, you decide who inherits your property and assets after your death. Your will outlines your decisions and provides instructions on how you wish to manage your estate. If you’re concerned about how your family can manage the assets and properties after your death, putting a testamentary trust in your will can be an effective solution.

This type of trust is a provision in your will that becomes active upon your death. It designates a trustee to manage your assets for your chosen beneficiaries. This arrangement is particularly beneficial for beneficiaries like children or family members with disabilities who may struggle with handling a large inheritance.

If you’re considering this option but feel unsure, here are three benefits of having a will with a testamentary trust.

Protection for young or vulnerable beneficiaries

One of the main benefits of a testamentary trust is the layer of protection it adds to the inheritance process. It acts as a safety net for beneficiaries, prioritizing their well-being and financial stability.

For instance, if you have minor children or family members with disabilities, a testamentary trust can distribute financial support over time instead of a potentially overwhelming lump sum.

Control over asset distribution

A testamentary trust allows you to control the distribution of your assets after your death. You can dictate when and under what circumstances the beneficiaries receive their inheritance. For example, you could state that the inheritance will be released upon meeting certain requirements or life events, like graduating from college or getting married.

This level of control can ensure that beneficiaries use the assets in a way that aligns with your values and goals.

Potential tax benefits

While the main purpose of a testamentary trust is to care for your loved ones, it can also offer potential tax advantages. Depending on the size of your estate and your specific circumstances, a testamentary trust might reduce the tax burden on the estate. However, it’s important to note that tax outcomes can vary and most often require additional guidance to understand fully.

A will with a testamentary trust is not a do-it-yourself project. It’s a complex legal document that you should carefully prepare. For guidance, consider seeking an attorney. They can help you write a legally compliant will.

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