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What is a Testamentary Trust in a Will
The Testamentary Trust in a Will is recommended when you have minor children, or children that cant handle money.
A testamentary trust is a Trust set up inside your Will
A regular trust is funded during your lifetime with your assets.
A Testamentary Trust in a Will is not funded until you pass away.
A regular trust costs between $2,500- $4,000 to set up.
A Testamentary Trust in a Will is costs approx $500.
A testamentary trust in a Will (sometimes referred to as a will trust or trust under will) is a trust which arises upon the death of the testator, and which is specified in his or her will.
Testamentary trusts are distinguished from inter vivos trusts, which are created during the settlor's lifetime.
There are four parties involved in a testamentary trust:
· the person who specifies that the trust be created, usually as a part of his or her will, but it may be set up in abeyance during the person's lifetime. This person may be called the grantor or trustor, but is usually referred to as the settlor;
· the trustee, whose duty is to carry out the terms of the will. He or she may be named in the will, or may be appointed by the probate court that handles the will;
· the beneficiary(s), who will receive the benefits of the trust;
· Although not a party to the trust itself, the probate court is a necessary component of the trust's activity. It oversees the trustee's handling of the trust.
A testamentary trust is a legal arrangement created as specified in a person's will, and is occasioned by the death of that person. It is created to address any estate accumulated during that person's lifetime or generated as a result of a postmortem lawsuit, such as a settlement in a survival claim, or the proceeds from a life insurance policy held on the settlor. A trust can be created to oversee such assets. A trustee is appointed to direct the trust until a set time when the trust expires, such as when minor beneficiaries reach a specified age or accomplish a deed such as completing a set educational goal or achieving a specified matrimonial status.
For a testamentary trust, as the settlor is deceased, he or she will generally not have any influence over the trustee's exercise of discretion, although in some jurisdictions it is common for the testator to leave a letter of wishes for the trustee. In practical terms testamentary trusts tend to be driven more by the needs of the beneficiaries (particularly infant beneficiaries) than by tax considerations, which are the usual considerations in inter vivos trusts.
Source https://en.wikipedia.org/wiki/Testamentary_trust
Using a Spendthrift Trust in a Will for children with substance abuse issues
A spendthrift trust in a Will is one of the best options when estate planning for addicts. There are several forms of this trust a parent can consider, and each has pros and cons. At its most basic, the spendthrift trust enables a parent to put spending authority in the hands of a trustee, or a trusted person who will control the reckless spending of the child. This can prevent them from wasting funds and can prevent them from using funds to purchase drugs.
Spendthrift clauses in trusts are also valuable because a parent can use them to provide necessary funds such as food, clothing, cab fare and shelter to the beneficiary, without allowing them to spend anything else. This enables a parent to offer support, even after a parent are deceased.
Finally, spendthrift clauses typically protect the funds in the estate from creditors. So long as the funds are in the trust, creditors cannot reach them. This is ideal in instances where the child may have to declare bankruptcy due to poor financial decisions while under the influence of drugs or alcohol, has a large amount of debt, or is likely to accrue a large amount of debt. However, once funds are taken out of the trust, they can be garnished by creditors. Creditors include child support, alimony, taxes, Medicaid.
In some cases, a parent may be able to set up a discretionary spendthrift supplementary needs trust, which enables the child to qualify for needs-based government benefits (SSI, Medicaid, housing, SNAP, etc.), while offering the other benefits of the trust.
The best way to set this up is to create a Testamentary Discretionary Trust with a spendthrift clause, which will come into effect after a parent are deceased. Then, the funds will be moved into trust and spending will be controlled by the trustee for the benefit of the child (the beneficiary). Source https://beginningstreatment.com/estate-planning-for-addicts/
N.J.S.A. 3B:31-38 Discretionary Trusts
N.J.S.A. 3B:31-68 Discretionary Powers
Originally drafted by one of NJ’s top attorneys Glenn A. Henkel, also a past great Wrestler at St. Thomas Bishop Ahr High School Edison with Ken V on wrestling team
