Individuals often cite their young age or lack of assets as why they don’t engage in estate planning. Death has no boundaries, however. It can occur to anyone at any time.
A will can ensure that your assets seamlessly pass on to your heirs as per your wishes. Setting up a trust allows you to continue providing for their financial needs once you’re gone.
What is a testamentary trust, and how do you set one up?
A testator sets up a testamentary trust while drafting their will. In that legal document, the prospective trust owner designates the assets that they want into the trust upon their death.
Testators can set up multiple testamentary trusts, each with their own distinct appointed trustees and named beneficiaries and instructions for administering them.
It’s not uncommon for a parent, as a trust owner, to place assets into the trust earmarked for their child. Their instructions may only allow for the release of assets at prescribed intervals to ensure that their child uses anything that their parent leaves them responsibly.
How do living and testamentary trusts differ?
Multiple kinds of trusts exist. While a testamentary one goes into effect upon its owner’s death, a living one does at the time of its drafting.
Living trusts can either be irrevocable or revocable. The former means that you cannot make changes to it. The latter means that you can make modifications as you please. A testamentary trust functions a bit differently in that the trust owner can make changes to it up until their death. It becomes irrevocable once they pass away, though.
Many individuals looking to set up trusts do so to ensure that their loved ones avoid the probate process. A living trust beneficiary avoids having to do this since their assets transfer from the trust owner to them before their passing. Testamentary trust owners still have full control over their assets up until their death. Thus, anything that they pass from one person to another as part of a testamentary trust must still pass through the probate process.
Keeping clear the differences between one trust and another isn’t easy. Each carries tax implications, a factor that may also make it difficult to decide between one and another. An estate planning attorney here in Alpharetta can guide you in determining what option is best for you and your Georgia family.