A trust in a will is called a testamentary trust. It’s becoming more common to find trusts in wills, especially for people who don’t want to immediately distribute their property, who prefer to distribute their property in increments after death, or for those who foresee having minor beneficiaries upon their death.
What is a trust in a will?
A trust is a legal arrangement where a trustor transfers his property to a trustee, who then manages it for the benefit of the beneficiaries. Generally, trusts are immediately effective upon execution and funding of the trust. A trust in a will, however, only becomes effective upon the death of the testator and when the testator’s will is admitted to probate. If the will is not admitted to the probate, the trust in the will is ineffective, and the testator’s property is distributed in accordance with state intestate laws.
Testamentary trust vs. will
A will is a legal document executed by the testator directing the disposition of his property upon death. In a will, the distribution is immediate and in lump sum after debts are paid. In New York, seven months after the appointment of the executor and the creditors’ right to file a claim has lapsed, the executor already distributes the testator’s property.
A testamentary trust, however, allows the testator to not immediately distribute the property, and instead have it managed, and given to the beneficiaries in increments. This is especially important when the beneficiaries are minors and the testator feels that a lump sum distribution to the minors might be too much for a minor to handle.
Testamentary trusts are also popular in case there is a disabled child with special needs. This allows the parent to leave property to the child, without worrying that the disabled child might mismanage the property.
Disadvantages of a trust in a will
A trust in a will has its own disadvantages.
First, in order for a trust in a will to be effective, the will must be properly executed and admitted to probate. If the will is not admitted to probate, there can be no testamentary trust. If you expect your heirs to object to your will, the admission of your will to probate may be delayed, or worse, your will will not be admitted to probate at all. If your reason for having a testamentary trust is important, such as having a supplemental or special needs trust for a disabled child, it might be better to forego having the trust in the will, and instead, to establish a trust in an independent document.
Second, the trust in a will is not private. When the will is admitted to probate, the will becomes a public document. This treatment of the will as a public document will extend to the testamentary trust, which is contained in the will. If you prefer to keep your property and dispositions private, executing a separate trust, instead of a trust in a will, might be a better solution.
Third, the property transferred under the trust in a will does not avoid probate. One of the main reasons people execute trusts is to avoid the expensive and litigious process of probate. When you hold property as grantor, trustee, and beneficiary, when you die, the successor trustee can immediately acquire your property by simply submitting your death certificate and his affidavit as trustee, among other things. Transfers of property under trusts are easier, faster, and less expensive. If the property has to go through probate, property cannot be transferred until a petition for probate or administration is filed, and certain procedures and formalities are observed. In the case of a trust in a will, such testamentary trust does not enjoy the general characteristic of trust property, which avoids probate. This is a main disadvantage of a trust in a will.
A trust in a will, or testamentary trust, can be a cheaper alternative to having an independent trust because your attorney can simply incorporate the trust in the will’s provisions. Writing a separate trust document may be more expensive in terms of initial costs. Ultimately, what trust to use will depend on your estate planning objectives. An estate planning attorney can give you better perspective on whether a trust in a will is a suitable option for your needs.
Should you need assistance in executing a trust, the Law Offices of Albert Goodwin are here for you. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 718-509-9774 or send us an email at firstname.lastname@example.org.