Once this trust is established, it allows the Executor and Trustee to
control the distribution under certain conditions or parameters. For
example, at a certain age/ages; for certain costs and expenses (for
minor beneficiaries); or for controlling how much is distributed at a
time for spendthrift beneficiaries.
As with all trusts, a testamentary trust has three parties: the
settlor (the deceased), the trustee (commonly the Executor and Trustee
who manage the assets held in the trust), and the beneficiaries (who
receive the benefit).
It is especially useful in the following situations:
- Your beneficiaries are unable to manage the inheritance due to
- Your beneficiaries are minors;
- Your beneficiaries have significant debts; or
- You are
in a blended family and want to ensure that some of your assets are
transferred to the children from a previous relationship.
Your will establishes the terms of a testamentary trust, but it is
not settled until assets have transferred into the trust after you
have passed away. As with any estate document, a testamentary trust in
your Will can be modified while you are still alive (provided you have
the mental capacity) to adapt to changing situations.
While you can appoint a separate Trustee, most often your
Executor acts as the Executor by calling in assets, and as
Trustee by managing the assets. Choosing your trustee is an important
part of this preparation. Your trustee should be someone that you
trust. It can be a person or persons, or a trust company (corporate
executor and trustee) such as National Bank Trust.
Legal counsel prepares your will, but your wealth advisor and
financial planner should always be included in the process to ensure
your financial plan is aligned with the objectives contained in your Will.
When it comes to estate planning, every situation is different.
Should you determine that a testamentary trust is right for you,
ensure it is properly drafted in your Will and kept up to date.