A testamentary trust will, often referred to as a will trust, is a will that creates a trust upon the death of the testator. A trust, by definition, is an arrangement where property or assets are managed by one person for the benefit of another person. In a trust, the settlor entrusts their property to trustees, the people responsible for managing the property. The trustees then hold a legal title to the trust corpus, or trust property, and are required to hold that property for the beneficiary.
A testamentary trust will, then, is a "trust in a will." This type of will involves 4 groups of people:
The testator who creates the testamentary trust is called the trustor, or settlor.
The trustee, who is generally the executor of the will and responsible for managing the trust for the beneficiaries.
The beneficiaries, which can be one or more people, who receive the benefits of the testamentary trust will.
A probate court is required in this type of will, unlike other types that often aim to avoid probate court. Probate court is responsible for overseeing the handling of the trust by the trustee.
A testamentary trust will is a legal entity and is created to address estate accumulated during the testator's lifetime. As with other types of wills, a testamentary trust will has certain benefits over others.
This type of will can be used to guarantee oversight of the testator's assets, through a probate court. Additionally, the formation of a trust protects assets meant to be given to minors until those minors become self-sufficient, or meet the terms of the trust. For example, if a father sets up a testamentary trust for his children in his will, the property and assets may not be available to the beneficiary children until they obtain a bachelor's degree. This type of will also saves money, often only costing the amount required to prepare the will, and probate court fees.
As with all types of wills, there are a number of disadvantages that come with setting up a trust. The appointed trustee will be required to meet regularly with probate court to oversee the assets and prove that the trust is being properly handled (invested, managed). This can potentially cost the trustee a sizable amount of money in court fees and time lost (which are deducted from the estate).
The trustee will also be required to see the trust through its duration, which can lead to legal liability, significant time loss, and emotional attachment. Additionally, a trustee may not accept the appointment in which case a probate court will appoint another, capable trustee. The trustee may also become dishonest, forcing beneficiaries to take legal action that may take a long time and cost a lot of money.