Trusts are an essential element in designing an estate plan, as they can offer a range of benefits that fit certain circumstances.
Here, our Massachusetts estate planning attorney talks about the differences between a testamentary trust and a revocable trust:
What Is a Trust?
Trusts are legal arrangements that allow a person or organization to manage assets on behalf of another person or organization. A trust is created when one party (the settlor or grantor) transfers legal ownership of their assets to another party (the trustee) to manage and distribute the assets according to the settlor’s wishes. The trustee is legally responsible for the trust and must adhere to the terms of the trust document.
What Is a Testamentary Trust?
A testamentary trust is an important estate planning tool that can be used to manage and protect the assets of a deceased person. It is a type of trust that is created upon the death of the grantor or settlor and is typically used to provide for the care of minor children or other beneficiaries.
A testamentary trust is created in a will and is funded upon the death of the grantor. The trust can be used to provide for the care of minor children, to protect assets from taxation, or to provide a source of income for a beneficiary. The trust can also be used to protect assets from creditors.
A testamentary trust can provide a great deal of flexibility in terms of how the assets are managed and distributed. For example, the trustee can be given the authority to make decisions about how the trust assets are invested or to make distributions to the beneficiaries as needed. Additionally, the trustee can also be given the authority to make decisions about how the trust assets are distributed after the beneficiaries reach a certain age.
What Is a Revocable Trust?
A revocable living trust is established during the lifetime of the grantor and is immediately effective. It is its own agreement, and any assets included must be transferred into the trust in order for it to carry out the desired intentions. The grantor, who is usually also the trustee, retains ownership of the assets and has the ability to alter or nullify the trust after it is set up. The trust can be utilized to distribute assets before, at, and after the death of the grantor.
What Are the Differences Between a Testamentary Trust and a Revocable Trust?
The difference between a testamentary trust and a revocable trust is an important consideration when it comes to estate planning. Both types of trusts are used to manage assets and provide for beneficiaries, but they differ in how they are created and the level of control the grantor has over the trust. It’s important to understand the differences between the two, so you can make the best decision for your estate planning needs.
A testamentary trust is created upon the death of the grantor by the terms of the grantor’s will. The trust is funded with assets from the estate, and the grantor will outline the terms of the trust, including the beneficiaries and how the assets will be managed. A testamentary trust is irrevocable, meaning the terms of the trust cannot be changed after the grantor’s death.
A revocable trust, on the other hand, is created by the grantor during his or her lifetime. The trust is funded with assets from the grantor’s estate, and the grantor has the ability to make changes to the trust as long as they are alive. The grantor also has the power to revoke the trust at any time.
The primary difference between a testamentary trust and a revocable trust is that a testamentary trust is irrevocable, and a revocable trust is revocable. This means that the grantor of a testamentary trust cannot make any changes to the trust after they have passed away, while the grantor of a revocable trust can make changes as long as they are alive.
Another important difference between the two is that a testamentary trust is created upon the grantor’s death, while a revocable trust is created during the grantor’s lifetime. This means that a testamentary trust can be used to manage assets and provide for beneficiaries after the grantor’s death, while a revocable trust can be used to manage assets and provide for beneficiaries while the grantor is still alive.
Finally, testamentary trusts are generally used to provide for beneficiaries who are minors or have special needs, while revocable trusts are often used to manage assets and provide for beneficiaries who are not minors or who do not have special needs.
Conclusion
Understanding the key differences between a testamentary trust and a revocable trust is essential when it comes to estate planning. It’s important to understand the different types of trusts, and how they work so you can make the best decision for your estate planning needs. Consulting a seasoned Massachusetts estate planning attorney can help you understand this even deeper.
Lawyer Frank MacLean of MacLean Law Firm LLC has been giving individuals in Southeastern Massachusetts and the encompassing Greater Boston area dependable legal services for more than three decades. He works diligently to safeguard his customers and their families. Schedule a meeting with our trusted Massachusetts estate planning attorney today!
