Testamentary Trust Paperwork and a Gavel on a DeskA testamentary trust is trust created in someone's last will and testament. While many trusts are established during the grantor’s (creator's) lifetime, a testamentary trust goes into effect only upon death. 

Understanding Florida Trusts

A trust is a special sort of fiduciary relationship, in which the grantor (i.e, trust creator) grants another party—known as the trustee—the right and duty to hold property for the benefit of a third party. Trusts can receive and retain ownership of almost any sort of asset, including but not limited to:

  • Homes
  • Real property
  • Motor vehicles
  • Cash accounts
  • Investment portfolios
  • Firearms
  • Artwork

In estate planning, trusts are often used to:

  • Avoid probate. If a Florida resident passes away without a trust, their assets will usually be subject to probate, the time-consuming process whereby a court oversees the payment of the estate’s debts and the distribution of assets from the estate to heirs and beneficiaries.
  • Exercise control over assets. Some trusts allow for the trustor to transfer assets into the trust’s possession while they are still alive, allowing them to retain partial or total control over the assets until they pass away.
  • Protect privacy. Probate proceedings take place in court, which means they become part of the public record. Since most trust transactions take place behind closed doors, a trust can help protect heirs’ privacy.

However, unlike conventional living trusts, testamentary trusts are still subject to probate.

Testamentary Trusts

People often believe that wills and trusts are mutually exclusive. However, the testamentary trust provides something of a common ground between these two popular estate planning instruments.

Specifically, Florida law allows for living persons to sanction the creation of a trust in their last will and testament. If done correctly, the will allots certain assets to the trust’s care. Once the trustor passes away, the designated assets are transferred to the trust.

People sometimes create testamentary trusts because:

  • Testamentary trusts seem simple. People may establish testamentary trusts because they seem simple. After all: the trust is established by the will, allowing the grantor to create a trust without drawing up separate documents.
  • Testamentary trusts are controllable.  Although conventional living trusts still allow the trustor to retain rights of access to any assets they transfer to the trust, they still necessitate a change in ownership. However, testamentary trusts allow the grantor to keep assets titled in their own name.

Why Testamentary Trusts Can Be Problematic

Since testamentary trusts are created by the provisions of a will, a probate is needed to admit the will to probate. In Florida, probate is the process that:

  • Recognizes a will and establishes its validity
  • Accounts for the entirety of the estate’s asset
  • Pays the deceased person’s remaining debts
  • Oversees the distribution of assets in accordance with the terms of the will, if any exists

Under most circumstances, probate is overseen by the court and carried out by a personal representative (or executor) named in the will. However, probate can present unexpected challenges—for the executor, and for heirs—if the deceased person sought to establish a testamentary trust. This is because the trust necessitates a second level of administration above and beyond probate.

If the grantor’s last will and testament was not recently revised, or was written without the assistance of an estate planning attorney, the personal representative may struggle to complete the transfer of assets into the trust’s care, especially if the deceased person did not clearly explain the conditions of the trust or nominate presumptive trustees.

When to Use Testamentary Trusts

We typically use testamentary trusts in more simple estate planning situations, such as where someone wants to leave assets to a minor beneficiary.  Here, the trust would typically say "I give my assets to my child/children." If, however, this child is under a certain age (like 25), then his or her share is held by someone trustworthy until that child reaches an older age. This trust is known as a testamentary trust as it only comes about once the testator dies.

Contact an Attorney Today

If your loved one’s will includes a testamentary trust, DeLoach Hofstra & Cavonis P.A. could help you navigate the complexities of Florida probate to receive a hassle-free inheritance. Please send us a message online or call us at 727-777-6842 to schedule your consultation as soon as possible.