A trust document is a legal document that dictates a variety of terms and conditions. It specifies the assets that are being placed into the trust, the beneficiaries of it, and the roles and responsibilities of the trustee, who is the person or entity that manages the trust assets. The trust document also establishes the purpose of the trust, such as providing for the care of a family member or preserving assets for future generations.
What is a Revocable Trust?
A revocable trust, also known as a revocable living trust, is a type of trust that can be modified or dissolved by the person who created it, known as the grantor or settlor, during their lifetime. This means that the grantor retains control over the assets in the trust and can make changes to the trust document or even revoke the trust entirely.
One of the main advantages of a revocable trust is that it can be used to avoid probate court, which is a legal process that is required for transferring assets through a will. When a person dies, the assets in a revocable trust can be transferred to the beneficiaries without the need for probate court. This can save time and money and can also keep the details of the estate private.
What is a Testamentary Trust?
A testamentary trust is a trust that is established through a will. It only comes into existence upon the death of the person who created the will and the trust, known as the testator. The will specifies the terms of the trust and the assets that are to be placed into the trust. The will also names the trustees who will manage the assets in the trust and the beneficiaries who will receive the benefits of the trust.
The key feature of a testamentary trust is that it only comes into existence after the death of the person who created it. At this point, it will go through probate process, which is a legal process that is required for transferring assets through a will.
Testamentary trusts can be used for various purposes, such as providing for a minor or incapacitated child, preserving assets for future generations, or providing for a specific purpose such as education or healthcare expenses. It is also used for estate planning, tax planning and asset protection.
The Difference Between a Revocable & Testamentary Trust
The main difference between a testamentary trust and a revocable trust is the timing of their creation. A testamentary trust is established through a will and only comes into existence upon the death of the person who created the will and the trust, known as the testator. On the other hand, a revocable trust is created during the lifetime of the person who established it, known as the grantor or settlor.
Another key difference is that testamentary trusts go through the probate process, which is a legal process that is required for transferring assets through a will. Probate can be a time-consuming and costly process, and it can also make the details of the estate public. In contrast, assets in a revocable trust can be transferred to the beneficiaries without the need for probate court, which can save time and money and can also keep the details of the estate private.
Additionally, a revocable trust allows the grantor to retain control over the assets in the trust and to make changes to the trust document or revoke the trust entirely. Testamentary trusts are established and set through a will and the terms are established by the testator at the time of creating the will, the assets in it cannot be changed or taken out by anyone else, except through a court order.
Another key difference is the purpose of the trusts. A testamentary trust can be set up to take effect after the death of the testator to provide for a specific purpose such as education or healthcare expenses, providing for a minor or incapacitated child, preserving assets for future generations. A revocable trust is usually set up for estate planning, asset protection and tax planning during the lifetime of the grantor.
Do you have more questions about the differences between trusts? Reach out to our office today to learn more about the unique distinctions. Call Eastham Law Offices at 561-395-6800 or fill out our contact form and we will be in touch to schedule an appointment.