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Estate planning stands as an essential mechanism to secure the well-being of your cherished family members following your passing. By integrating trusts alongside a Last Will and Testament, the distribution of your assets aligns with your desires while also mitigating unnecessary tax implications. Among these trusts, testamentary trusts emerge as a potent strategy for diminishing estate duty liabilities and ensuring the proficient management of your valuable holdings.

Distinguishable from inter-vivos (living) trusts, a testamentary trust comes into being after your passing, drawing guidance from your Last Will and Testament in lieu of a Trust Deed. This dynamic structure defines authority, responsibilities and beneficiaries of the trust.  The trio of the testator, trustees and beneficiaries constitutes a testamentary trust.  Appointing a minimum of two trustees is prudent: one possessing expertise in managing trusts professionally and the other intimately acquainted with beneficiaries’ best interests. Notably, a beneficiary’s guardian need not serve as a trustee.

A testamentary trust bears particular significance for those with minor children or grandchildren, providing comprehensive guardianship during their formative years and laying the foundation for their higher education and unforeseen contingencies.  In the absence of a testamentary trust, bequeathing assets to a minor child triggers the transfer of monetary sums to the Guardian’s Fund, overseen by the Master’s Office until the child reaches adulthood. This conservative management approach might undermine the asset’s value, entailing substantial administrative burdens and restricting utility until adulthood.

A testamentary trust seizes control over asset disbursement, preserving assets until beneficiaries are financially prudent. Trustees can facilitate educational, living and maintenance expenses, even beyond beneficiaries’ majority age. Many trusts stipulate dissolution upon beneficiaries reaching 23 to 25 years fostering financial maturity before inheriting.

Testamentary trusts evolve with family dynamics, adjustably moulded as circumstances transform.  For parents with limited immediate assets, a posthumous testamentary trust emerges, encompassing future acquisitions.  Opting for a testamentary trust defers expenses to the deceased’s estate, potentially funded by life insurance proceeds.  Yet, clear instructions within the will are imperative, especially since the Will acts in the place of a Trust Deed for a testamentary Trust, underscoring the need for professional drafting when establishing a posthumous trust.

Seizing the opportunity to incorporate a testamentary trust into your estate planning ensures shrewd asset management.  This approach safeguards assets for minor beneficiaries, nurturing growth beyond inflation while fostering responsible financial stewardship and allowing minor beneficiaries to still receive needed maintenance for education and necessities whilst ensuring that assets continue to be well-managed. Empowering your loved ones with educational prospects and essential needs, testamentary trusts re-define how you craft your legacy within your Last Will and Testament.

 Author:  Stacy Rouchos, Managing Director, Bannister Trust

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