Advantages of a Testamentary Trust

A testamentary trust is a popular tool commonly used in estate planning. Although it is similar to a family trust, there are some key differences that many people would consider to be advantages. Here are some of the advantages of using a testamentary trust.

Flexibility

One of the big advantages of using a testamentary trust is the flexibility that you will have regarding the trustee. With this type of arrangement, you can name any individual as the trustee to your trust. This means that if you want to name a family member whom you trust as the trustee, you could potentially do so. With this type of arrangement, you will want to make sure that you choose someone whom you can trust at all times. They will be making important decisions for your estate once you are gone, so it is important to choose the right trustee for your needs.

Taxation

With the testamentary trust, you will also be able to take advantage of certain tax benefits. This is especially true when you want to leave part of your estate to minors. When you use a family trust to distribute assets to minors, they will have to pay penalty tax rates for receiving anything over $1100. With a testamentary trust, the minors can receive up to $10,000 per year without paying any taxes on it. In addition to that, if they receive more than $10,000, they will simply be taxed at the regular income tax rate for adults. You can even distribute money to multiple beneficiaries if you choose, and they will receive the same tax benefits. This means that you can distribute much more tax-free money with this type of trust than you could with a family trust.

Protection from Creditors

Another advantage of a testamentary trust is that you can protect your money from creditors. With this type of trust, you will be able to ensure that your beneficiaries receive the money that is coming to them. They will not have to use part of their money to pay off debts for you along the way. This can provide your beneficiaries peace of mind when it comes to worrying about creditors coming in and taking a big chunk of money.

Taking Care of a Beneficiary

This type of trust structure also provides a great way for you to take care of beneficiaries. For example, if you have a beneficiary who is mentally challenged or cannot handle his own financial responsibilities, using a testamentary trust can be a great way to help him out. You can potentially name that individual as a beneficiary to the trust and name someone else as the trustee. This means that the beneficiary will not have to make any important financial decisions, but he will be able to receive as much of the estate as you would like him to get.



Testamentary Trust



A testamentary trust is a type of trust that goes into effect after an individual passes away. The trust is set up based on the instructions in the individual's will and estate planning documents. This type of trust is in contrast to the inter-vivos trust in which an individual sets everything up during his or her lifetime. With a testamentary trust, you have to make the proper provisions to provide money to the trust once you pass away. The trust is generally taken care of by the executor of the estate. This individual will act as the trustee for the testamentary trust.

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