What is a Testamentary Trust?

Georgia allows residents to create many different types of trusts as part of their estate plan, including both revocable and irrevocable trusts that can ensure family members receive assets quickly without having to go through probate or that can allow the person who makes the trust (known as the settlor, grantor, or trustor) can protect assets while still providing benefits for a loved one. A specific type of trust that is somewhat distinct from other kinds of trusts in Georgia is the testamentary trust. Unlike a trust that is established during the settlor’s lifetime (whether revocable or irrevocable), a testamentary trust is not fully created or funded until the settlor dies.

How do testamentary trusts work and why might you want to plan for one? Consider the following information from our Norcross estate planning attorney.

Testamentary Trusts Are Contained in a Person’s Will 

In Georgia, these trusts are often used by parents who want to leave money or property to their children but don’t want them to receive everything all at once. Instead, the trust allows a trustee—someone you choose—to manage those assets and distribute them over time according to your wishes.

Because the trust is part of your will, it must go through probate court in Georgia before it becomes valid. That means your estate will need to be formally administered through the court system, which can take several months or more. During this process, the court verifies your will, appoints an executor, and ensures debts and taxes are paid before the trust is funded.

While testamentary trusts can be a helpful tool, they do not avoid probate. If your goal is to bypass the court process, protect your privacy, or speed up inheritance for your loved ones, you may want to consider a revocable living trust instead.

While other types of trusts are established as separate entities, a testamentary trust is contained within a person’s will. Accordingly, if you were to create a testamentary trust, you would work with your estate planning lawyer to have the terms included in your will. The testamentary trust would not actually exist at this point. Rather, upon your death, the testamentary trust would be created and funded by your estate, including by assets from a life insurance policy or other assets that you do not have at hand in your lifetime.

Simplicity of Testamentary Trusts Compared with Other Trusts 

While no trusts are simple, in comparison with other kinds of trusts, there is a greater simplicity to testamentary trusts since they are contained within a will and do not require the separate establishment of a trust. They can also be easier to fund since testamentary trusts can be funded through a person’s life insurance policy that pays out upon death. Further, since these trusts are created in your will, you can revise or revoke the trust at any time during your lifetime (just as you can other terms of your will).

Probate is Required for Testamentary Trusts

 Unlike other kinds of trusts, since they are contained in a will, testamentary trusts must go through probate.

Beneficiaries of Testamentary Trusts Can Vary

 It is up to you to decide who you want to name as a beneficiary of a testamentary trust, and it is up to you to determine the terms of the trust (including who will be named as trustee and how the trust will pay out). You can use a testamentary trust to ensure that a guardian has the necessary assets to care for your minor child, for example, or to ensure that a loved one with special needs continues to have the assets they need after your death.

Contact a Gwinnett County Estate Planning Lawyer 

Estate planning in Georgia can be complicated, especially when you start to consider the establishment of trusts. While trusts can make your estate plan more complex, they can also be a critical tool for allowing your loved ones to avoid probate, ensuring that loved ones receive the assets they need, and protecting assets for an extended period of time. Whether you want to find out more about trusts in Georgia more generally, or you want to discuss a testamentary trust specifically, a Gwinnett County estate planning attorney at Bowman Law Firm can assist you. We can speak with you about trusts and estate planning in Georgia, and we can begin working with you today on your estate planning needs. Contact us to get started.

Source:

law.justia.com/codes/georgia/title-53/chapter-12/article-6/part-1/section-53-12-101/