A trust is when someone, (often referred to as the grantor or trustor), transfers ownership of the property to a legal entity called a trust to hold for the benefit of another person, known as a beneficiary. Most trusts are set up by someone before they die as part of their estate plan. Trusts also have a person appointed as the trustee to manage the property owned by the trust for the beneficiary. A trust can also be created after someone’s death, called a testamentary trust.
The grantor of a testamentary trust creates the rules for transferring their assets before they die, and typically provides this information in their will. This trust does not go into effect until after they die, and allows them to spread out or delay payment of their assets or decide under what specific conditions their beneficiaries will receive inherited funds or property.
For example, in a testamentary trust a mother might specify in her will that when she dies, her assets will be held in trust and managed for the benefit of her children until they reach the age of 21, but that they may receive funds before age 21 if those funds are used for college or other educational expenses.
5 Benefits Of a Testamentary Trust
Some people set up trusts with a bank or other financial institution as the trustee, but a testamentary trust may also be established with a family member as the trustee to reduce costs.
Testamentary trusts can be a useful instrument for effective estate planning. Please call or email our estate planning attorneys at Estate and Planning Legal Group in Lombard Illinois so we can schedule your initial consultation, 630.800.0112