A testamentary trust is created through a last will and testament.
Two of the most widely known terms associated with estate planning are last will and testament and trusts.
Although these are not the only instruments used in estate planning, they are foundational to the distribution of inheritances to heirs.
Trusts are categorized in several ways.
They can be either irrevocable or revocable, or can be living or testamentary.
While living trusts are effective during the lifetime of the trustmaker, testamentary trusts are under a last will and testament and only come into existence as an entity after the death of the testator (or testatrix, if female).
Although testamentary trusts rely on probate for their existence, they are still powerful instruments for structuring distributions to heirs.
Parents of minor children and those concerned about potential squandering, divorce, lawsuits, bankruptcies, or inheritances that could leave the bloodline may find testamentary trusts critical to their estate planning peace of mind.
Unlike living trusts, testamentary trusts are part of the public record due to their involvement with probate courts.
When considering the use of a testamentary trust in your estate plan, it is important to understand whether its advantages and disadvantages are best for your goals.
Parents may choose a testamentary trust to provide for minor children who cannot inherit directly.
To create a testamentary trust, your last will and testament must include specific instructions.
What instructions should be included?
You will need to name a trustee, designate beneficiaries for the trust, and outline when and how assets can be used.
Because the trust is created from your last will and testament, probate is required for its establishment.
What is probate?
Probate is the legal process for validating a last will and testament and overseeing estate settlement.
Before a testamentary trust can be activated, the court must finalize probate.
When the trust takes effect, the trustee must manage the assets in accordance with the instructions provided in the trust.
Depending on the terms created by the testator, the funds may be used to pay for educational expenses, paid to beneficiaries over time, or restricted to beneficiaries until they reach a specified age.
Some testamentary trusts can last for generations.
The primary benefit of a testamentary trust is the same as all inheritance trusts.
It provides more control over asset management by establishing guidelines to be followed after the testator's death.
Why would control be an important goal of estate planning?
If the children are minors, they cannot legally manage their own inheritance and will need someone to do so on their behalf.
While minors cannot legally govern their own inheritance, adult children may not be capable of handling an inheritance due to substance abuse or poor financial habits.
When a beneficiary requires long-term support, a trust can be used to provide long-term financial care.
As noted above, a testamentary trust can also be beneficial in shielding inheritances from potential squandering, divorce, lawsuits, and bankruptcies.
For some people planning their estates, testamentary trusts may offer simplification for asset management while the testator is alive, because assets are transferred to a trust only upon their death.
Whether you designate a trusted individual or a professional to serve as trustee, the fiduciary role provides additional guidance, support, and oversight for the beneficiaries.
Although testamentary trusts grant the benefit of control, they are ineffective as a probate avoidance strategy.
Because a last will and testament provides the direction for their creation, a probate court must be involved in their establishment.
In addition to being public, probate can be both time-consuming and costly.
However, in my experience over more than 32 years, these oft-cited downsides to probate are greatly mitigated depending on the degree of prior organization and communication between the testator and personal representative regarding the nature and location of assets and professional advisors.
Because testamentary trusts are not operational until after the conclusion of probate, beneficiaries will not have access to funds during the time of the court proceedings.
With revocable living trusts, you can adjust the terms based on whether they are working well or not so much before they become irrevocable after you die.
Testamentary trusts have no room for trial and error because the trust terms will be fixed upon their creation -- your death.
Lastly, the public nature of probate proceedings can increase the risk of estate challenges from disgruntled family members for a testamentary trust.
For those who value both simplicity and oversight, a testamentary trust may be the right instrument.
If you have a fairly simple and straightforward estate but want more guardrails for your heirs, you may want a testamentary trust.
A revocable living trust is ideal for individuals who prioritize flexibility, privacy, and avoiding probate.
Remember: Probate will always be necessary as long as you have a minor child in the home.
The probate judge is charged with the responsibility of "appointing" the guardian (backup parent), and likely it will be the same guardian choice you "nominated" in your last will and testament.
An experienced estate planning attorney can help you navigate your options and advise you on the estate planning instruments to meet your needs best.
Testamentary trusts establish greater control over asset distribution after you die.
Because these trusts are created through a last will and testament, they are only effective after the probate process.
Probate may lead to significant delays in access to funds and limit privacy around your estate settlement and trust because the court makes the information available to the public through court records.
Working with an experienced estate planning attorney can help individuals decide whether testamentary trusts align with their needs and goals.
This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.
Reference: MetLife (March 13, 2025) "Testamentary Trust: Definition and How It Works"
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