A will trust is a trust that is literally contained within a will and created upon the death of the testator, the person who created the will. A trust is a legal arrangement in which a ‘grantor’, the person creating the trust, transfers ownership of property to the trust and selects a trustee to manage it. The trustee may be a family member, a friend, professional trustee or a trust attorney, and in the case of a living trust, the grantor may also be the trustee, and they invest, distribute or manage the property for the beneficiaries named within the trust.
A will trust, which is also known as a testamentary trust, is often funded by the proceeds of a life insurance policy. It is often used to ensure minor children receive an income and property is held until they are able to handle the finances on their own, which is an age usually specified within the trust documents. A will trust may also be used to ensure the care of a loved one with special needs, since it allows oversight over the trustee, as a probate court supervises the trustee during the life of the trust.
While a testamentary trust is a powerful estate planning tool, particularly when it comes to children and those with special needs, it takes away one of the primary advantages of a living trust, which is avoiding probate. Another drawback to a will trust is that it is an irrevocable trust, meaning the terms of the trust cannot be modified or changed once the trust is created upon the death of the grantor. Up until that point, the trust terms may be changed by an update or change to the will.
Using a will trust within an estate plan can meet a family’s goals and needs in certain circumstances, but it important that you work with an estate planning attorney to make sure that all aspects of the estate plan coordinate to use this tool successfully.