When you create a trust instead of a will, you will avoid the need to go through the probate process. Trusts are not subject to probate and they can simplify the process of distributing your assets to your beneficiaries. There are many different types of trusts, including testamentary trusts. A testamentary trust is a type of trust written into a person’s last will and testimony.
If you’re interested in creating a testamentary trust, the Mississippi estate planning attorneys at Palmer & Slay, PLLC, are here to help. We have helped many clients create comprehensive and effective estate plans tailored to their unique needs and goals. After carefully listening to your goals and learning more about your situation, we will help you understand your options. We can help you draft a will that includes a testamentary trust. Contact Palmer & Slay, PLLC, today to schedule your initial consultation.
What Is a Trust?
A trust is a legal document that holds and protects financial assets, including real estate and personal property. The trust agreement contains instructions for distributing the assets owned by the trust. Many estate planners are turning to trusts to avoid probate. There are three essential roles of a trust: the trustor or grantor, the trustee, and the beneficiary. The trustor or grantor is the person who creates the trust by signing the trust agreement and transferring property into the trust.
Once the trustor transfers property into the trust, the trust owns the property. Trust grantors can appoint a trustee or trustee to trustee, or multiple trustees to manage the assets in the trust for the benefit of the beneficiaries. The beneficiaries are the people or non-profit organizations receiving the assets in the trust. The grantor can appoint a trusted family member, friend, or professional trustee like a bank or attorney as the trustee.
What Is a Testamentary Trust?
There are two main categories of trusts: testamentary and inter vivos. Inter vivos trusts are created during a person’s lifetime. The two types of inter vivos trusts are revocable and irrevocable trusts. Irrevocable trusts can be modified and revoked during the grantor’s lifetime. As the name implies, irrevocable trusts cannot be modified or revoked. Irrevocable trusts offer more protection against creditors and are frequently used as special needs trusts to help a person qualify for Medicaid eligibility for long-term care insurance.
On the contrary, a testamentary trust is created by a person’s will and isn’t enforced until the person who created the will dies. When a person creates a testamentary trust through his or her will, the trust is not in effect until he or she passes away and won’t exist during the testator’s lifetime. The portion of the will that will create the testamentary trust can provide for the distribution of a portion or all of your estate. Many estate planners use testamentary trusts to protect proceeds from their life insurance policies. After the testator dies, the proceeds from the life insurance policy will be transferred into the testamentary trust. A testator can create more than one testamentary trust for each will. Many testamentary trusts are created to provide for relatives with disabilities, young children, or other beneficiaries who may inherit a significant amount of money when the testator passes away.
The Benefits of a Testamentary Trust
A testamentary trust may be beneficial when a person’s estate is relatively small compared to potential life insurance proceeds or other amounts that the estate will receive at a person’s death. Additionally, including a testamentary trust provision is an affordable option during the preparation of a last will and testament.
How to Create a Testamentary Trust in Mississippi
To create this type of trust, a person needs to include language in his or her will directing the creation of the trust. The provision should include language appointing a trustee to manage the assets in the trust for the beneficiary. The testator must appoint a trustee and beneficiary or beneficiaries in the provision.
The testamentary trust won’t activate until the person who created the will dies. Specifically, after the probate process has been completed, the trust will become active for the benefit of the beneficiaries. From the time the creator of the trust, or settlor, passes away until the testamentary trust expires, the probate court has the authority to ensure the trust is being handled properly.
Selecting a Trustee
As the person creating a testamentary trust, you have the right to choose anyone to act as the trustee. We recommend appointing someone you trust who is willing to fulfill his or her duties well. Many select a professional trustee, such as a bank or attorney, to ensure the trustee makes wise financial decisions with the investments in the trust. You may want to appoint an alternate trustee if your first choice cannot take on the responsibility. Otherwise, a court will appoint a trustee.
How Long Will a Testamentary Trust Last?
Testamentary trusts last until they expire. As the creator of the testamentary trust, you can determine the specific length of time the trust will last. Many trusts created to benefit minors or young adults expire when the beneficiary turns 25 years old, gets married, or graduates from university.
Potential beneficiaries or other interested parties can bring a legal claim against the trustee if they think the trustee is mismanaging funds or otherwise breaching their fiduciary duties. Depending on how long the testamentary trust lasts, the legal fees could add up, taking away assets from the beneficiaries. Potential legal and probate costs should be considered when deciding whether to create a testamentary trust.
Contact a Testamentary Trust Attorney in Mississippi
Planning for your future by creating an estate plan can provide you and your loved ones with long-lasting benefits. At Palmer & Slay, PLLC, we’ve provided clients throughout Mississippi with comprehensive estate plans. Whether you have questions about creating a testamentary trust or another estate planning tool, we are here to answer your questions. Our skilled attorneys can help you draft the legal documents you need to protect yourself, your assets, and your loved ones. Contact Palmer & Slay, PLLC, to schedule your initial consultation.