Joseph Fedorowsky – Legal Blog

As distinguished from an inter vivos or living trust, a testamentary trust is effective upon the death of its settlor (the person who sets up the trust) and the will is handled through probate. Every state has its own statutory requirements which must be followed when probating or processing a will.

The most typical or common reason for using a testamentary trust is to conserve a decedent’s assets and to transfer wealth. A testamentary trust requires a trustee who administers the res or trust property which comprises a decedent’s estate. The trustee’s responsibilities include the orderly distribution of various property to beneficiaries named in the will, as set out in the trust.

There are substantial tax consequences when probating a testamentary trust. At the time of the decedent’s death, the assets of the trust are subject to estate and transfer taxes. It is the trustee’s responsibility to sort out these issues, generally by working with probate counsel.

The advantage of a testamentary trust is that the settler, the decedent, has a great deal of control over how the estate is distributed. This may well be a significant issue for the decedent, especially when it comes to setting aside the finances for a loved one’s education or maintenance.

Joseph Fedorowsky / Legal Blog

A trust is one of the oldest and most respected legal agreements. In theory, a trust is fairly simple. Essentially, one person holds and manages assets for the benefit of another.

As in any legal form, certain elements are required. In the United States, five different elements are required: a trustor, trustee, beneficiary, trust property (sometimes referred to as the res) and a trust agreement. The trustor is also referred to as a settlor, grantor or donor.

In other countries, a sixth element may also be required, that of a protector.

These elements are simple enough. The complexity and fun really begins when you must address the who, what, when, where and why’s of setting up, operating and dissolving the trust.

Joseph Fedorowsky / Legal Blog