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TESTAMENTARY
TRUSTS
A testamentary trust is a
substitute for an outright gift
under your will.
A trust is an arrangement
under which you give your
property to somebody else and he
or she holds it for your or your
beneficiaries. You will want
to give the other person
directions concerning how the
property is to be managed, how
much income you want, who gets
the property when you die, what
the other person’s fee is for
holding and managing your
property, and so on. Those
directions should be spelled out
in a writing, called a trust
agreement, to prevent
misunderstandings later on.
Testamentary trusts are
trusts established by a will.
The testamentary trust takes
effect at death. In a
testamentary trust, the trustee
would not get the property until
you die; you would control the
property until then. The assets
must go through probate before
being placed in the testamentary
trust.
Benefits of a Testamentary
Trust
1. You can name the time the
recipient is to receive the
property. If you do not set up a
trust under your will, then any
beneficiary, including your
children, will take the property
when they turn eighteen in
Colorado. You may think age
eighteen is too young for your
daughter to receive 100 shares
of stock. The advantage of a
trust is that you can
predetermine the age at which
you want your daughter to get
those 100 shares. You can
provide that she gets only the
income from the shares until age
twenty-five. You can also
provide that if the trustee
determines that she needs some
of the principal for her health
or education before she reaches
twenty-five, then the trustee
can distribute whatever number
of shares the trustee decides is
best. The trust would end when
your daughter reaches
twenty-five, at which time she
would take the remaining shares
outright.
2. A trust provides for
competent management. An
outright gift of property to a
beneficiary who has poor
business sense, or who is ill,
or who is not competent because
of young or old age could result
in a fast loss of that property.
A trust can provide protection
for the recipient. It can give
the benefits of the property,
while making sure that the
property is not all lost. When
you choose your trustee, you
will want to choose someone
whose management and business
sense your respect. A member of
the family is not always the
best trustee.
3. A trust can keep property in
your family. A trust can be
useful if you are in a second
marriage. For example, If you
had children in a prior
marriage, a trust can enable you
to provide for your current
spouse, but ensure that property
passes to your children when he
or she dies in whatever shares
and proportions you state in
your will.
4. A trust can put certain
restrictions on property.
5. A trust can transfer property
after a beneficiary dies.
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