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Texas law allows people to create trusts through their wills. A trust created through a will is a testamentary trust because the person’s Last Will and Testament created the trust. The trust does not exist until the person who made the will dies. If the person creates a trust while they are still alive, on the other hand, that trust is an inter vivos or living trust because it existed while the person who created the trust was still alive.
This blog will cover how to create a testamentary trust within your will: protecting minors and beneficiaries with special needs. A Texas estate planning attorney can draft your legal documents to meet your goals and wishes.
An Overview of Testamentary Trusts in Texas
In its simplest form, a testamentary trust can be a mere sentence or two within a person’s will. For example: “I leave $100,000 to my child, (Name) to be held in trust until their 18th birthday, with (Name) serving as Trustee.” If the trust is for a beneficiary with special needs, the will could direct the executor of the will to create a Special Needs Trust for the person with special needs.
How Testamentary Trusts for Minors Work
You have some flexibility on the terms you can choose for a testamentary trust. You do not have to direct the trustee to pay out the money when the child turns 18. Some might suggest that doing so is usually not in the best interests of the typical 18-year-old.
You might have the trust distribute the money when the child turns 21, 25, 30, or some other age. You could have the distribution split up into segments, like, half at age 21 and half at age 25.
Another possibility is to tie the distributions to life events. For example, half when the child earns a four-year college degree and half when they receive a graduate degree. This flexibility is one of the attractions of testamentary trusts.
Special Needs Trusts Explained
If you have a loved one with special needs, they could lose eligibility for extremely valuable government benefits like a monthly check, health insurance, and housing if they receive an asset directly. Still, family members often want to help a close relative who has challenges.
With a special needs trust, the person with special needs never actually owns the asset, so it cannot count against them for purposes of public assistance eligibility. Instead, the special needs trust owns the asset, and the designated trustee manages the trust and distributions to keep the trust compliant with the law. The trustee will need to educate themselves on permissible uses of the assets of the trust so that the document does not become void. Regardless of whether you would like to set up a testamentary trust for a minor child or a beneficiary with special needs, you will want to get advice and guidance from a Texas estate planning attorney. People who try to use forms and other “self-help” methods of creating trust documents might not follow all the rules for these estate planning devices to be enforceable. Reach out to our office today, we gladly offer a free consultation.