Testamentary Trusts: are they clever?

Testamentary Trusts: Using these are a pretty inefficient way to go about estate planning. 

A Testamentary what?

A Testamentary Trust is a trust written into your Will. It essentially says that when you pass away, your property goes into a trust. Then your Trustee may distribute assets in the ways you directed. Sounds clever, right? 

Well, clever is maybe not the right word for it. With a testamentary trust, you’re going to necessarily have to probate that Will. So, the court could say yes, now there’s officially a Trust and this and this and this property goes into the trust, so that the Trust may then be administered. Then, the Trustee can distribute the assets however they are supposed to go, according to what you directed in your trust. BUT, you have to go through probate for this and the Court is going to supervise the process. And then, you may also have to follow up and file annual accountings from year to year, so that the court can see and review “here is what the Trust did this year.”

In my view this is really the worst of both worlds. It is not the end of the world but it’s not an efficient way to go about your estate planning. It is maybe not the best way to get assets to those you care for. You have already written (someone drafted it for you) a trust anyway (within your Will). Then you also had to go through probate, which you wouldn’t have had to do if you just had a straight up Trust drafted. And again you also may have to have the distribution and all spending of that trust supervised by the court with an annual accounting that needs to be filed and approved by the court.

In my mind you waste a lot of time and money. The straightforward way through this is in the first place, when you thought you should write a trust within a Will. Why not write a trust NOT within a will. What does that Will do to add value for you? At its best, the Will dumps the assets it covers into your trust through the probate process. But I can’t imagine how that is more efficient than you simply conveying those assets into your trust when you first organize your trust. How did probate improve things for your family?

Testamentary trusts? I don’t like them. 

I’m Dan Covington. You can always find me at Estate Plan Kansas.

Contact me for a free consult.