Planning with Testamentary Trusts

Video

Hi folks, it’s Andy Stautz at Stautz Law. I’m back with a follow up video. Last time we talked about the difference between testamentary trusts created in your last will and testament, and inter vivos trusts which were created, you know, between living people.  

What Can a Testamentary Trust Do?

And I said, hey, wait a minute, you know? Testamentary trusts are probably underused.  

Just like inter vivos trusts the really common revocable living trust, even a supplemental needs trust, which I’ve discussed in the past. You know, a testamentary trust can do all of those things. It’s just a matter of when it’s created by will versus while alive.  

So let’s talk planning scenarios.  

I think pretty much every estate planner, every estate planning attorney kind of has their own favorites, right? Their own plans that they like to recommend.  

Example 1: Testamentary Trust as Worst-Case Backup

One that I’m seeing kind of often and that I think deserves consideration is what I’ll call the emergency, like the worst-case scenario trust. OK so if my clients are young adults, you know, maybe in their 20s, in their 30s, even in their 40s, and they’ve got kids, they need some sort of estate plan.  

But their risk of death or simultaneous death of both parents is really very low. So really they don’t need to be putting everything in a trust right away. . . . . They’re not at a point in their life where they really need to be…. focused on administering their property. They don’t want extra administrative burdens ‘cause having young children is hard enough.  

So one thing I’ve gone to recommending is a will with a testamentary minor’s trust. So. You know you’re not avoiding probate, right? It’s a will. But you’ve at least got the trust in there, so if something bad does happen, you know you can, at least control the distributions to your minor children. You can designate a guardian. And… it’s kind of like a halfway plan, right?  

Cost-Benefit; Remote Risk; Serious Consequences

It’s like. We can mitigate the worst of the risk. You know, it’s a remote risk. But the consequences of not planning at all are big.It’s kind of halfway in cost and complexity between no plan or just beneficiary designations or whatever, and full blown trust planning.  

It’s just like, OK, well, let’s get a will in place with a testamentary trust that takes care of the kids. You hope you never have to use it, but at least it’s, you know it’s there and it’ll cut down on the worst consequences. 

So that’s a common scenario. 

Example 2: SNT for Continuing Care

I mentioned supplemental needs trust earlier. That’s another really common one, that’s more common for older clients. Where maybe they’ve got adult children, an adult child with a disability and they’ve been caring for that person. You know they can do it fine while they’re alive. They don’t need an inter vivos trust right away. But it’s like, OK, how to continue the care after death. Well, a testamentary supplemental needs trust that can carry that forward. So that’s another common planning scenario.  

But like I said, you know, you’re only limited by your imagination. So if you want to talk about your circumstances, give me a call. These are fun puzzles to solve. And it’s always good to get a plan in place. Thanks for listening and I’ll see you next time.