The Benefits of Setting Up a Testamentary Trust for Minor Children

Being a parent calls for an immense amount of responsibility. Raising children requires all your focus to be on making sure your child is well cared for today and in the future. Preparing for your children’s financial future is paramount in ensuring their well-being.

While many young families know to set up a will once having children, as it covers critical components like guardianship for minor children, a testamentary trust is a key tool that should not be overlooked when planning your finances. Testamentary trusts, which are created in your will, provide a robust and flexible way to protect, manage, and distribute assets.

In this article, we’ll cover the advantages of setting up a testamentary trust for minor children so their financial future is secured, no matter what life brings.

What is a Testamentary Trust?

Before we outlined the benefits of testamentary trusts, let’s explain what this is and who it could be right for. A testamentary trust is a legally binding agreement that allows you to manage how your assets will be passed on. This type of trust is specified in your will and goes into effect after your death.

When setting up a testamentary trust for minor children, it can outline when minors will receive these assets whether that be based on age or life circumstances. That makes testamentary trusts good options for parents with minor children or adults looking to pass on wealth to minor grandchildren.

Protection of Assets

A testamentary trust provides protection for assets and wealth that is being passed on to minor children. It allows the parent, guardian or relative to choose a trustee who will manage and distribute the assets according to their wishes. This ensures your most valuable assets are being managed properly after death and that the minor child’s best interests are taken into consideration.

Age Appropriate

A testamentary trust provides more flexibility than other types of trusts since it can be structured to meet your specific needs and wishes for the minor child. One major benefit to this is specifying either an age or life circumstance for the distribution of assets.

For example, instead of minor children receiving an inheritance once they turn 18, you can specify in your testamentary trust for it to be upon graduating college, getting married or turning a different age. There is a great deal of flexibility offered in testamentary trusts to cater to the minor children receiving your most valuable assets.

Financial Support for Children

A testamentary trust is particularly useful in setting aside funds for specific needs like education or healthcare. With this trust, you can earmark assets for your child’s college tuition, school expenses, or even their first car.

Similarly, if your child has ongoing medical needs or encounters a health emergency, the trust can be structured to cover these costs. This way, you’re not just leaving your children an inheritance; you’re giving them a financial safety net that can support them through life’s major milestones and unexpected challenges.

Potential Tax Benefits

One of the key advantages of setting up a testamentary trust for minor children is the potential for tax benefits. These trusts, like all trusts, can only be taxed once. Because of this and other tax implications, the minors who are listed as beneficiaries could receive a larger inheritance than with other estate planning options.

It’s important to note that tax laws can be complex and change frequently, so it’s always advisable to consult with an estate planning attorney to fully understand the potential tax implications and benefits.

Peace of Mind

By establishing a testamentary trust, you are taking a proactive step to safeguard their future, knowing that your hard-earned assets will be managed responsibly and distributed according to your wishes. It eliminates the worry of what could happen to your wealth after your passing and provides reassurance that your children will be financially taken care of. This sense of security, knowing your children’s future is well-planned, is truly priceless.

What to Consider When Setting Up a Testamentary Trust

The selection of the trustee is of utmost importance as this person or institution will be responsible for managing your assets until the beneficiaries receive them. Choosing a trustee is an estate planning step that should be taken very seriously.

Another important thing to note is that testamentary trusts do go through probate, the court process that begins after your passing, which means the minor children will not receive assets or inheritance until probate is complete. While this may not be an issue for some families, it is something to keep in mind when considering if a testamentary trust is right for you.

Get Started Today

Setting up a testamentary trust can be a great way to ensure that minor children in your life, whether your children, grandchildren or other loved ones, are provided with financial security and protection.

If you’re looking for an estate planning lawyer in Milwaukee or Wauwatosa, call Margerie Law today.

By Paul Margerie, Owner of Margerie Law

Paul Margerie of Margerie Law is a knowledgeable and experienced estate planning attorney based in Wauwatosa, WI. With years of experience helping families and individuals with their estate plans, he offers a gentle touch that puts his clients at ease. He understands the sensitive nature of this work and ensures that all details are taken care of with precision and accuracy. He strives to help each client achieve peace of mind that their future is protected by providing personalized advice and creating tailor-made solutions that fit their individual needs.