A testamentary trust is an estate planning
tool whereby a trust is established through a testator’s will, and comes into
effect when the testator dies. In the
past, absent a particular circumstance, clients were advised to avoid
testamentary trusts for several reasons.
The Will would have to be filed for probate in order for the trust to
take effect. The court would then have
continuing oversight of the testamentary trust, and the trustee was required to
provide the court with annual accounts.
In order to avoid the ongoing administrative obligations and costs of probating
an estate and managing a testamentary trust, most often estate plans would avoid
testamentary trusts and instead include a “pourover trust”. The testator’s will would provide for the
estate to “pour over” into a separate trust over which the court would have no
authority or supervision. The pourover
trust might contain essentially the same provisions as would the testamentary
trust, but would be administered privately without the court’s
involvement.
Under the new
Massachusetts Uniform Probate Code, testamentary trusts have come back into favor.
The Court no longer has continued supervision over a testamentary trust, and the
previous administrative obligations no longer exist. With
the relaxing of the former requirements, testamentary trusts will often be a
more simple, direct and appropriate method for leaving estate assets in trust.
It should be
noted, however, that although testamentary trusts may be a simpler yet equally
effective method of trust planning, it will be necessary to file the will for probate
in order for the provisions of the testamentary trust to be implemented. If probate avoidance is an important
component of a client’s wishes, a testamentary trust will not be the proper
vehicle. Rather, to avoid probate, all
assets must be held in non-probate form, and the pourover trust will continue
to play an important role in achieving the goal of probate avoidance. Under the new MUPC, however, testamentary
trusts have regained favor and are often the estate planning vehicle of choice.
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