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When Should a Will Include a Trust

By: Beau P. Sagona, Esq.

A Last Will and Testament commonly addresses three items:

  1. Who inherits the decedent’s property;
  2. Who handles the decedent’s estate; and
  3. Who will raise the minor children if both parents are deceased.

A fourth item to address – when circumstances warrant – is a testamentary trust. A testamentary trust is simply a trust included in a will. It does not come into existence until death. At least five circumstances may warrant inclusion of a trust in a will.

 

Minor Children warrant consideration of a Testamentary Trust.

Parents with minor children (under 18) wish to avoid the need to obtain court authority to act with regard to the children’s property if both of them die. Property inherited by a minor is subject to court supervision. If the children’s guardian, called a “tutor” or “tutrix” in Louisiana, wishes to sell a minor’s property, she must obtain court authority to do so. If a minor’s property is left in trust, it is not subject to court supervision.

 

Grandparent bequests to grandchildren often use a Testamentary Trust

Grandparents wish to leave bequests to minor grandchildren, but to have a trustee manage the bequests until the grandchildren are older. This is common when a predeceased child left minor children. It also makes sense in the event that a child with minor children dies after the will is written or if the grandparents do not trust the son-in-law or daughter-in-law to manage the bequests to their grandchildren.

 

Testamentary Trusts Can Protect Spendthrifts (i.e., those who have difficulty wisely handling money)

A legatee is a spendthrift or has a substance abuse or gambling problem. Leaving a substantial bequest in this instance – especially money – is inviting disaster. The trust can instruct the trustee on when to distribute income, what circumstances warrant dipping into principal, and whether the trust can be terminated if the legatee gets his act together.

 

Divorced parents might wish to use a Testamentary Trust

A divorced parent does not trust her ex-spouse to properly administer their minor children’s property in the event of her death. She is likely to prefer a trusted sibling to serve as trustee of the children’s trust. The divorced parent may not have a lot of money, but she may have life insurance or assets in retirement accounts. In such instance, the divorced parent must change the beneficiary designations to direct these items into the trust.

 

Testamentary Trusts Protect Young Adults from Wasting their Legacy

A legatee will not be of suitable age and discretion to handle a legacy until some age after 18. Children that age are less likely to make wise money decisions if left a substantial sum. It is commonly accepted that the brain is fully developed by age 25, so that is a common age for terminating a trust and letting the child take control of what was left to her.

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