Testament trusts, often referred to as “trusts under will” or “testamentary trusts,” are a common tool in estate planning. They come into effect after the grantor’s passing and are established through a will. While testament trusts offer certain benefits, it’s essential to understand their potential disadvantages to make informed decisions about their inclusion in your estate plan. Here are a few reasons why you may need to consider going for this type of trust.
1. Delayed Activation
One significant disadvantage of testament trusts is their delayed activation. Unlike living trusts, which take effect immediately upon creation, testament trusts only come into play after the grantor’s death. This delay can lead to complications if the beneficiaries require immediate access to assets for essential needs such as education or medical expenses.
2. Probate Involvement
Testament trusts are subject to the probate process, which involves court supervision and can be time-consuming and costly. Assets held in testament trusts must go through probate before being distributed to beneficiaries, potentially causing delays in the transfer of assets and added administrative expenses.
3. Limited Privacy
Unlike living trusts, which allow for private asset distribution, testament trusts become part of the public record during probate proceedings. This lack of privacy can expose sensitive family and financial information to public scrutiny, potentially leading to disputes or unwanted attention.
4. Potential Disputes
The delayed activation and probate involvement of testament trusts can increase the likelihood of disputes among beneficiaries. Family dynamics, changing circumstances, or disagreements over asset distribution may lead to costly and emotionally draining legal battles, detracting from the intended purpose of the trust.
5. Less Flexibility
Testament trusts are generally less flexible than living trusts. Once established through a will, they may be challenging to modify or revoke without going through a legal process, potentially resulting in limitations on adapting the trust to changing family needs or evolving legal regulations.
6. Limited Asset Protection
While testament trusts can offer asset protection benefits, they may not provide the same level of protection as more complex irrevocable trusts. Depending on the terms of the trust and the applicable laws, creditors or legal challenges may still have the ability to access trust assets.
7. Costs and Complexity
Setting up and administering testament trusts can involve legal and administrative costs. The complexity of the probate process, coupled with potential court fees and attorney expenses, can reduce the overall value of the estate and impact the inheritance received by beneficiaries.
Get Help Today & Consult With An Estate Planning Attorney
While testament trusts can be valuable tools in estate planning, it’s crucial to recognize and carefully weigh their disadvantages against their benefits. The delayed activation, probate involvement, limited privacy, potential disputes, reduced flexibility, limited asset protection, and associated costs highlight the complexities of these trusts. When considering testament trusts in your estate plan, it’s essential to consult with an experienced estate planning attorney. We will offer you the support and guidance you need at Hurban Law.
