Extension Office: Discussing Testamentary Trusts

This is part of monthly series of articles focusing on estate and legacy planning. Authors are Kaleena Miller, Madison-Jefferson County Extension Agent, kaleena.miller1@montana.edu, and Marsha Goetting, MSU Extension Family Economics Specialist, goetting@montana.edu.

A person can create a testamentary trust with a written will says MarshaGoetting, MSU Extension family economics specialist. A testamentary trust is one that is set up according to the instructions contained in a person’s last will and testament. The owner’s property, such as stocks, bonds, mutual funds, home, bank or credit union accounts, and certificates of deposits, must first pass-through probate. Then the personal representative transfers the title of the property to the testamentary trust. The will-maker names a trustee to manage the assets on behalf of the beneficiaries adds Kaleena Miller, Madison-Jefferson CountyExtension Agent.

“A person can change the terms of the testamentary trust at any time before death by making a new will or adding a codicil to the existing will,” Goetting said. “A codicil is a supplement, amendment, or addition to a will. The codicil may explain, change, add to, subtract from, qualify, alter or revoke provisions in a will.”

Montana law allows minor children to inherit property. However, if the property needs management while the child is still a minor, the court appoints a conservator, Miller said. The conservatorship ends when the minor child reaches age 18 and the conservator releases the property to them.

“Some parents and grandparents consider 18 to be too young for a child to take control of a hefty sum of money or other property. These relatives may choose to leave assets in a testamentary trust for the child’s benefit,” Goetting said. “The child may receive income from the trust for purposes outlined in the trust agreement. Then the trustee can give the money or property later at an age when the trustee believes the child has achieved financial maturity.”

Another use of testamentary trust is for a caregiver spouse. A caregiver may create a testamentary trust in the will and name a trustee. The trustee manages property and assets for a surviving spouse who because of Alzheimer’s does not have the mental ability to make financial decisions. The trustee can also use the funds to pay for health insurance and living costs for the surviving, disabled spouse.

More information about testamentary trusts is available from MSU Extension in a MontGuide at the store.msuextension.org. For those who do not have computer access, copies are available from the Madison-Jefferson County Extension office at 287-3282.