4 Important Decisions That Are Made In Your Last Will & Testament

If you are starting to go through the estate planning process, it's important to know what decisions you will need to make about the distribution of your estate. When you get your last will and testament drafted, there will be several decisions that you will outline in the document. This article will discuss some of those decisions.

Testamentary Trust

A testamentary trust is typically used when the testator has minor children they would like to list as a beneficiary. If you have assets or funds that you do not want your minor child to receive at the time of your passing, you can use a testamentary trust to make sure they receive it at the time you decide.

When you create a testamentary trust, you will designate a trustee. The trustee will not own the asset or property (the trust will) but they will be responsible for managing it until it is time for the beneficiary to receive it.

Here's an example. You have a large sum of money that you would like to leave your son. Since he is only 12, you don't want him to receive it right away.

Using a testamentary trust, you can put your brother in charge of the funds and indicate in your trust that you want your son to receive the money when he turns 25. During that time period, the trustee will make sure that the money is kept safe. Once your son is 25, your brother will give him the money.

The trustee's duties include:

  • Not mishandling the assets.
  • Not using the assets for themselves.
  • Has to act in the best interests of the beneficiary

Spousal Testamentary Trust

One of the decisions you will have to make can involve the disposition of a property after you pass away. In some cases, a testator may want to make sure that their spouse is taken care of after they pass. They also want to make sure that their property eventually goes to their intended beneficiary.  

This can be done by using a spousal testamentary trust. A spousal testamentary trust works as a placeholder for your property until the beneficiary is able to receive it.

Here's an example. Frank decides that he wants his house to go to his daughter Gloria. Frank is still married to his wife Sarah. Frank includes a spousal testamentary trust in his last will and testament.

When Frank passes away, the spousal testamentary trust allows Sarah to use and manage the property. This means she can live in it and use it as if she owned it. However, Sarah will not be the owner of the property. The trust owns the property. When Sarah passes away, ownership of the property will finally go to Gloria.

Spousal testamentary trusts are used in case the surviving spouse remarries. It ensures that the property will not go to the new spouse, it will go to the beneficiary that the testator intended.

Credit Shelter Trust

A credit shelter trust is designed to make it easier on a potential beneficiary or trustee when it comes to taxes. If you include a credit shelter trust in your will, it provides the trustee (person responsible for managing an asset or property) the option to "disclaim" the asset. This allows the trustee to claim the federal tax exemption. This means that the trustee will not be required to pay taxes on testator's assets.

This does not mean that the taxes will not have to be paid. The eventual beneficiaries will need to pay those taxes if the trustee took advantage of the tax exemption. Conversely, if the trustee decides to go ahead and pay the taxes, then the beneficiaries will be able to claim the exemption.

Guardianship for Minor Children

One of the most important decisions you will make in your last will and testament is guardianship of your children. You will need to decide who you would like to care for your minor children in the event of your passing.

Typically, this duty would automatically go to your spouse. However, you can still choose a guardian to step in if your spouse passes away as well.

A guardian is the person who will be responsible for the daily needs of your child. You can name multiple guardians if you wish.

It is important to make sure you choose the right guardian for your child. If you do not make this decision in your last will and testament, the decision will be made by the probate court.

When you are drafting your last will and testament, you need to make sure you are making the best decisions possible for your loved ones. Consult with an attorney, such as Gruber & Associates, PC, who can help you draft the best will possible.

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