Freedom of Speech
Freedom of speech is the Constitutional right to communicate one’s opinions and ideas, using one’s body and property to anyone who is willing to receive them.
Do You Need a Trust? Part 2 – Testamentary Trusts
Types of Testamentary Trusts
In our previous article on trusts – “Do You Need a Trust? Part 1 – Living Trusts” – we described the kind of trusts estate planning clients are persuaded to create while they were still alive. We also described why in almost all cases, these trusts are a bad idea. However, there is a second kind of trusts – those created by the language of your will after you die. These are called testamentary trusts and can be very advantageous in certain situations. Moreover, they generally do not involve the huge legal fees and problems with encumbering your property caused by “living trusts.” Following are three kinds of situations where testamentary trusts may be a good idea: (1) “spendthrift” trusts, (2) special needs trusts for disabled beneficiaries, and (3) contingent trusts for children.
![“](https://ventolalaw.com/wp-content/uploads/2020/06/Testamentary-Trusts-representation-by-Ventola-Law-scaled.jpg"){kind=link}
Spendthrift Trusts
Let’s say you want to benefit someone in your will, but you know that this person is not good with money, and/or would spend money on something they shouldn’t. It is possible to benefit such a person by setting up a trust that is managed by someone else. The trust will only allow an expenditure when the trustee believes it is appropriate. These can be a good way to help family members who can’t be trusted with money, but still do not involve large legal fees or inconvenience when creating your estate plan, because the trust does not come into being until after you die.
Special Needs Trusts
These are trusts created to benefit people who are receiving disability benefits or may be in the future. The trust is designed to not be counted as income to the disabled individual and thus not reduce benefits. These trusts can also be created in your will to come into being after you die. However they require very specific language and should be drafted by experienced estate planning counsel. Unfortunately, I have seen situations in which beneficiaries and their family members wanted benefits to be treated as a special needs trust, but the language in the will failed to do so.
Contingent Trusts
Finally, if you have minor children, you will almost certainly want a “contingent trust,” which comes into being only if both parents die (or one parent if the other does not wish to manage the money). The reasons for not giving money directly to children are fairly obvious but some may think they can benefit their children by leaving their assets to whoever is going to be taking care of the children. Although seemingly simple, this solution has a number of drawbacks. One is that the funds would be subject to the creditors of the people taking care of the children. Another is that there will be no way of knowing whether the assets would ultimately benefit the children. A contingent trust ensures that the funds go to benefit the children, and can even be managed by a third person who will make sure the money is well spent.
In Summation
Unlike “living trusts,” testamentary trusts do not involve the same confusion and inconvenience, and can accomplish important goals of your estate plan.
For more information, sign up for our newsletter and get your free download.
Sam Ventola has over 30 years’ experience in estate planning, probate and probate litigation. When he is not working for his clients, he enjoys spending time with his family, especially his grandson.
Ventola Law serves the Denver Metro area including Arvada, Aurora, Boulder, Brighton, Commerce City, Castle Rock, Golden, Lakewood, Littleton and Arapahoe, Adams, Douglas and Jefferson Counties.