Summer 2014 Newsletter

Summer 2014
Inside This Issue
Introduction – Testamentary Trusts
Testamentary Trust Provision Requirements
Types of Testamentary Trusts
In the past several newsletters we have presented information on Obamacare so that you, the reader, may have a better understanding of how the new health care plans work and how to navigate the websites in order to obtain the best health care insurance for you and your family. As that dust has settled, for this Summer Newsletter, we are going to present information of a different sort. In the future, we will present all relevant updated information on Obamacare, as it becomes available.

Introduction – Testamentary Trusts

In the past, we have discussed why one needs a will and why some people prefer to set up trusts during their lifetimes; the idea being that the trust can provide for the use and distribution of assets during one’s life, and, also, provide for the contingencies of a person’s death, so as to obviate the need for probate of a will. Some think that is perfect for them, but others do not like the idea of transferring assets to a trustee during their lifetime. That surrender of control does not appeal to some. In addition, when creating lifetime trusts, there also can be income tax ramifications, which can be expensive, depending upon the type and amount of assets

For those reasons, many people prefer estate plans that are based upon a Last Will and Testament. Of course, a will which disposes of assets by direct transfer to beneficiaries may be inappropriate for some people or their families. In a case of that sort, a will should be prepared with the appropriate testamentary trust to comport with the family’s requirements. Rather than taking effect during one’s life, a testamentary trust takes effect upon his death.

Testamentary Trust Provision Requirements

If you decide that you would prefer to transfer property not to a beneficiary outright, but for the benefit of a beneficiary in trust, then your will must include language which provides for the appointment of a trustee to receive and manage the property in trust, and which sets forth the purpose of the trust. Many people appoint the executor of a will to serve as trustee as well, but that is not a requirement. Sometimes it is better to select an entirely different person, depending upon the purpose and expected lifetime of the trust.

Types of Testamentary Trusts

Supplemental Needs Trusts for the benefit of disabled children or grandchildren-This is a wonderful solution to the difficulty that many parents and grandparents of disabled children face. Supplemental Needs Trust provisions in a will allow parents to direct a legacy for the benefit of a certified-disabled child without causing an interruption in government benefits. Essentially, parents can remember all of their children, equally, in their estate plans, regardless of special needs.

Credit Shelter (Disclaimer) Trusts -These trust provisions preserve both the husband’s and wife’s estate tax credit. When the first spouse dies, the credit of the first spouse to die is preserved, in trust, for the benefit of the children, income to the surviving spouse during the surviving spouse’s life. When the second spouse dies, the children receive the benefit of both credits, that of both deceased parents. Without this device, the first credit would be lost completely to the children.

Charitable Trusts -Testamentary charitable trusts come in two types: the Charitable Remainder Trust or Charitable Lead Trust. The idea of helping others while helping oneself appeals to many. Gifting to charity by way of one of these trusts results in estate tax deductions. The trusts work in this way: the “lead” trust, wherein the charity is paid first, and the remainder, after trust termination, goes to beneficiaries, or the “remainder” trust wherein the charity is paid last after termination of the trust, after other beneficiaries have received payments.

Of course, a parent can include trust provisions that protect her minor children, or an individual can provide that income beneficiaries receive monies from rent producing real property, in trust. The above are just some examples; actually, trust provisions can be designed for any legal purpose, and should be considered for many estate plans. While the foregoing is just a very basic introduction, we hope that we have given you some ideas of what type of testamentary trusts can be included in your will. Contact your estate planning attorney for further information.

The above list is for general information purposes only. It is not intended to constitute individual legal advice or a specific recommendation to any particular client.


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