Attorney
When it comes to estate planning, different tools can significantly impact your family’s future. Two common types of trusts—testamentary and living trusts—each serve essential but distinct roles in managing and distributing your assets.
Choosing between a testamentary and a living trust depends on your unique needs and circumstances. In this blog, we’ll explore the key differences between these two types of trusts, helping you decide which might best fit your estate planning goals.
What Is a Testamentary Trust?
A testamentary trust is established as part of a will and only takes effect after the grantor’s death. It is a vital tool for those who want to ensure their assets are managed according to their wishes after they pass away. Here’s what you need to know:
- Created Through a Will: A testamentary trust is outlined in your will and is activated upon your death. It does not exist during your lifetime.
- Takes Effect After Death: Unlike living trusts active during your lifetime, a testamentary trust only becomes operational once you’ve passed away.
- Common Uses: This type of trust is often used to manage assets for minor children or beneficiaries with special needs or to provide for loved ones over time rather than a lump sum distribution.
- Subject to Probate: Since it’s tied to a will, the assets in a testamentary trust must go through probate, which involves court oversight.
A testamentary trust can be an effective solution for those seeking structured estate management.
What Is a Living Trust?
A living or inter vivos trust is a legal arrangement created during the grantor’s lifetime. It allows you to manage your assets while living and determines how they will be distributed after you pass away. Key aspects include:
- Created During Lifetime–Unlike a testamentary trust, a living trust is established and becomes effective while you are still alive. This allows you to manage your assets directly or appoint a trustee.
- Revocable or Irrevocable–Living trusts can be either revocable or irrevocable. A revocable trust allows you to make changes or revoke the trust entirely during your lifetime, offering flexibility. An irrevocable trust, once established, cannot be easily altered, providing more protection against creditors.
- Avoids Probate–One of the main benefits of a living trust is that it allows your estate to bypass the probate process, leading to a quicker and more private distribution of assets.
- Asset Management–This trust is ideal for those who want to ensure their assets are managed according to their wishes, both during their lifetime and after death.
In short, a living trust offers flexibility and control, making it a popular choice for comprehensive estate planning.
Testamentary and Living Trusts Are Not The Same
When choosing between a testamentary trust and a living trust, understanding the key differences can significantly impact your estate planning decisions. Below, we’ll break down the most essential distinctions between these two types of trusts.
Timing of Creation
A testamentary trust is created through your will and only comes into effect after your death. In contrast, a living trust is established during your lifetime, allowing you to manage your assets while still alive.
Control and Flexibility
A living trust offers greater control and flexibility, mainly if it’s revocable. You can adjust the trust or even revoke it entirely during your lifetime. On the other hand, a testamentary trust becomes fixed after your death, with no opportunity for modifications.
Probate Process
One significant advantage of a living trust is that it bypasses the probate process, leading to a quicker and more private distribution of assets. In contrast, a testamentary trust is subject to probate, which can be time-consuming and involves court oversight.
Costs and Complexity
Setting up a living trust generally involves higher upfront costs and detailed planning, but it can save time and money in the long run. A testamentary trust is more straightforward and less costly to establish initially, as it’s part of your will.
Whether you prioritize control, privacy, or simplicity, Berkley Oliver is here to guide you through the process and help you make the best choice for your estate.
Choosing the Right Trust for Your Estate Plan
Deciding between a testamentary and a living trust depends on your circumstances, financial goals, and family dynamics. If you seek control over your assets during your lifetime and want to avoid probate, a living trust might be the better choice. On the other hand, if you’re looking for a more straightforward, cost-effective option that takes effect after your passing, a testamentary trust could be more suitable.
At Berkley Oliver, we understand that every client’s situation is unique. Our experienced estate planning attorneys can guide you through the options, helping you make informed decisions that align with your goals. Whether you’re considering a living trust, a testamentary trust, or both, we’re here to provide personalized advice and ensure your assets are protected for the future. Contact us today to create a tailored estate plan that meets your needs.