How to Navigate a Testamentary Trust (Trust Under Will)

Managing a distribution from your estate to minors, adults with special needs, or people who have challenges managing money can be daunting. Each of these categories of recipients comes with its own challenges. However, with proper planning in place, we can help you navigate the Testamentary Trust process which allows you to leave distributions to minors or adult wards without worry and unnecessary added expenses.

Estate Distribution as it Relates to Minors

A minor cannot receive assets from your estate until they reach the age of 18, in which case the law requires a guardian to be appointed by the Clerk of Court to manage the funds.

That said, a guardianship can become cumbersome and expensive. The guardian is required to be bonded and file annual accountings with the court until the minor reaches the age of 18. This involves payment of the bond, court fees, and other various expenses that chip away at the assets intended for the minor.

In addition, the guardian’s services are not free of charge, which means even more expenses that must be paid before your minor heir comes of age and is unable to inherit. This is not the ideal solution by any means.

Estate Distribution as it Relates to Adults with Special Needs

Distributing estate assets works similarly with adults who have been declared incompetent by the Clerk of Court, although they are referred to as a “Ward.”

In these instances, a guardian must be appointed to manage the Ward's assets including the distribution from your estate that was intended for that ward. This guardianship carries the same burdens and expenses as the minor guardianship with the exception that this guardianship does not terminate at a specific age but carries on for the lifetime of the ward, or until such time as the court determines that competency has been restored.

Estate Distribution as it Relates to Anyone Deemed Incompetent by the Court

Finally, there may be adults who are not deemed incompetent by the court, but struggle with managing finances. While this does not come with the burden of a guardianship, it does cause concern about just how the individual will manage the assets they receive from your estate.

If an 18-year-old young adult inherits from your estate, what are the chances that the assets will be used or invested wisely? The 18-year-old is not incompetent but may lack the maturity to manage such a distribution from an estate. What do you do in any of the above cases?

Testamentary Trust Offers a Solution

Fortunately, there is a solution which can be incorporated into your will: a testamentary trust, often referred to as a trust-under-will. A trust of this nature can be, but does not need to be, a separate document. It can be drafted directly into the Will. In other words, the Will actually creates the trust at the time it is needed, if it is needed.

A testamentary trust allows you to leave distributions to minors or adult wards without worry. When preparing your will, a testamentary trust for the benefit of individuals, animals, charities, or other organizations allows you to nominate a Trustee. At the time of your passing, the Executor of your Estate will make the distribution to the testamentary trust created by the will rather than to the individual or organization.

In the case of minors, the testamentary trust allows you to specify an age at which the distribution is to be made or you may direct your Trustee to make incremental distributions over a period of time which you determine.

A testamentary trust allows for flexibility in the distribution of your estate and peace-of-mind knowing that the assets will be managed by your Trustee in the way and manner you intend. A testamentary trust greatly reduces the risk of needing a guardianship for the beneficiary, and greatly reduces the fees that would otherwise been paid in association with a guardianship.

HIRE AN ESTATE ATTORNEY IN RALEIGH TO ASSIST WITH A TESTAMENTARY TRUST

If you have minor children or there are beneficiaries who may have challenges managing finances, a testamentary trust may be the solution you need when you need it most. Contact our estate lawyer in Raleigh, NC to schedule a consultation. In addition to estate planning, our lawyer is here to help you with all your small business needs, trademarking, copyrighting, or other legal issues.

 

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