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A testamentary trust (sometimes referred to as a will trust or trust under will) is a
trust Trust often refers to: * Trust (social science), confidence in or dependence on a person or quality It may also refer to: Business and law * Trust law, a body of law under which one person holds property for the benefit of another * Trust (bus ...
which arises upon the death of the
testator A testator () is a person who has written and executed a last will and testament that is in effect at the time of their death. It is any "person who makes a will."Gordon Brown, ''Administration of Wills, Trusts, and Estates'', 3d ed. (2003), p. 556 ...
, and which is specified in their will. A will may contain more than one testamentary trust, and may address all or any portion of the estate. Testamentary trusts are distinguished from ''inter vivos'' trusts, which are created during the settlor's lifetime. There are four parties involved in a testamentary trust: *the person who specifies that the trust be created, usually as a part of their will, but it may be set up in abeyance during the person's lifetime. This person may be called the ''grantor'' or ''trustor'', but is usually referred to as the ''
settlor In law a settlor is a person who settles property on trust law for the benefit of beneficiaries. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is a testamentary trust, the se ...
''; *the ''
trustee Trustee (or the holding of a trusteeship) is a legal term which, in its broadest sense, is a synonym for anyone in a position of trust and so can refer to any individual who holds property, authority, or a position of trust or responsibility to ...
'', whose duty is to carry out the terms of the will. they may be named in the will, or may be appointed by the
probate court A probate court (sometimes called a surrogate court) is a court that has competence in a jurisdiction to deal with matters of probate and the administration of estates. In some jurisdictions, such courts may be referred to as Orphans' Courts o ...
that handles the will; *the ''beneficiary(s)'', who will receive the benefits of the trust; *Although not a party to the trust itself, the ''probate court'' is a necessary component of the trust's activity. It oversees the trustee's handling of the trust. A testamentary trust is a legal arrangement created as specified in a person's will, and is occasioned by the death of that person. It is created to address any estate accumulated during that person's lifetime or generated as a result of a postmortem lawsuit, such as a settlement in a survival claim, or the proceeds from a life insurance policy held on the settlor. A trust can be created to oversee such assets. A trustee is appointed to direct the trust until a set time when the trust expires, such as when minor beneficiaries reach a specified age or accomplish a deed such as completing a set educational goal or achieving a specified matrimonial status. For a testamentary trust, as the settlor is deceased, they will generally not have any influence over the trustee's exercise of discretion, although in some jurisdictions it is common for the testator to leave a letter of wishes for the trustee. In practical terms testamentary trusts tend to be driven more by the needs of the beneficiaries (particularly infant beneficiaries) than by
tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
considerations, which are the usual considerations in ''inter vivos'' trusts. If a testamentary trust fails, the property usually will be held on resulting trusts for the testator's
residuary estate A residuary estate, in the law of wills, is any portion of the testator's estate that is not specifically devised to someone in the will, or any property that is part of such a specific devise that fails. It is also known as a residual estate or ...
. Some famous English trust law cases were on behalf of the residuary legatees under a will seeking to have testamentary trusts declared
void Void may refer to: Science, engineering, and technology * Void (astronomy), the spaces between galaxy filaments that contain no galaxies * Void (composites), a pore that remains unoccupied in a composite material * Void, synonym for vacuum, a ...
so as to inherit the trust property. An infamous example is ''
Re Diplock ''Re Diplock'' or ''Ministry of Health v Simpson'' 951AC 251 is an English trusts law and unjust enrichment case, concerning tracing and an action for money had and received. Facts Various charities, including the Royal Sailors Orphans Girls� ...
''
951 Year 951 ( CMLI) was a common year starting on Wednesday (link will display the full calendar) of the Julian calendar. Events By place Europe * King Berengar II of Italy seizes Liguria, with help from the feudal lord Oberto I. He re ...
Ch 253, which resulted in the suicide of one of the trustees who was personally liable to account for trust funds that had been disbursed for what he thought were perfectly valid charitable trusts.


Advantages of a testamentary trust

*A testamentary trust provides a way for assets devolving to minor children to be protected until the children are capable of fending for themselves; *A testamentary trust has low upfront costs, usually only the cost of preparing the will in such a way as to address the trust, and the fees involved in dealing with the judicial system during probate.


Disadvantages of a testamentary trust

*The trustee is required to meet with the probate court regularly (at least annually in many jurisdictions) and prove that the trust is being handled in a responsible manner and in strict accordance with provisions of the will which created the trust. This may involve considerable legal fees, especially if the trust endures for several years or involves a sophisticated financial or investment structure, and always involves the fees imposed by the judicial system. Such fees and expenses are deducted from the principal of the estate; *The trustee must be prepared to oversee the trust for its duration, which involves a considerable commitment in time, possible emotional attachment, and legal liability; *A candidate for trustee may be named in the will, but that person has no legal obligation to accept the appointment. If no trustee is named in the will (or is unavailable, even if named), the probate court will appoint a trustee; *It can be difficult for beneficiaries to bring a dishonest trustee to account. They may sue at law, or the malfeasance may be pointed out at the annual probate court review, but such remedies are slow, time-consuming and expensive, and are not guaranteed to succeed.


Summary

Due to the potential problems, lawyers often advise that a ''revocable living trust'' or ''inter vivos trust'' be created instead of a testamentary trust. However, a testamentary trust may be a better solution if the expected estate is small compared to potential life-insurance settlement amounts.


References

{{DEFAULTSORT:Testamentary Trust Wills and trusts Equity (law) Legal terminology Property law Inheritance