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Testamentary Trusts/ Retention Trusts

One difficulty you may experience the during estate planning process is concern about how heirs might use the money and resources you left to them. People spend their entire lives investing in and growing their estate, and many folks want to make sure their heirs pay the same respect to these funds.

Although we can’t oversee these assets after death, we do have an estate planning tool that can help guide our heirs beyond our time: Testamentary Trusts (also called Retention Trusts).

A Testamentary Trust is a trust activated by the terms of your Will. To make a Testamentary Trust, your Will must include such a trust in its language and designate it as the beneficiary of some or all of your estate’s property. Your Will’s executor will distribute your estate to the trust during probate. You must select a trustee to manage your Testamentary Trust. Then, the terms of your Testamentary Trust will distribute your assets according to the terms you set.

The terms of your Testamentary Trust reflect your wishes for controlling your gifts to heirs. For example, if you’re worried that a beneficiary might go on a blowout shopping spree upon receiving a lump sum of cash, you might set the terms of your Testamentary Trust to distribute to beneficiaries in small increments over multiple years. Or, if you want to provide lump sums for certain beneficial activities, but not Las Vegas getaways, you can provide discretion to your trustee to distribute resources to fund, for example, college education or missions trips. These terms help ensure – to the extent possible – that your heirs use their gifts according to your wishes.

Testamentary Trusts help extend your wishes for your heirs long beyond your lifetime.