We have been contacted relatively often by clients specifically asking for a revocable living trust. They have discussed this widely-held estate planning tool with their friend, colleague or neighbor and are sure it is best for them. After meeting with the clients, ascertaining the size of their estate, and their specific needs and wishes, we might discover that a revocable living trust is not the best tool for them. What might work better for them is a testamentary trust.
A testamentary trust is provided for in a Last Will and Testament and comes into effect at a person’s death. It appoints a “trustee” to manage the funds in the trust until the person receiving the money takes over (if provided for). Why would someone choose this type of trust?
The testamentary trust is attractive to a client with a rather small estate in comparison to life insurance proceeds or other amounts that are payable to the estate AT DEATH. The client wants to provide for young children, loved ones with disabilities, or others who many inherit a large some of money. This type of trust is relatively inexpensive to prepare, as it is included in the Will. The client does not have to fund the trust at the time the Will is prepared. Clients without many financial resources at their disposal during their lifetime find this type of trust to be suitable.
Of course, there are some drawbacks to testamentary trusts. For example, they do not avoid probate court like revocable living trusts. So, how does one choose? This is a very personal question that will depend on your specific set of circumstances.
Remember, estate plans are like fingerprints; every individual has their own identifiers. One size does NOT fit all! Make sure your estate plan fits you! Contact C&G to discuss your specific needs today!
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