Testamentary Trusts
A Thoughtful Estate Planning Tool for Parents with Minor Children
Testamentary trusts are a unique type of trust because, unlike most trusts that are created as standalone legal entities, a testamentary trust is built directly into a will. It does not exist during a parent’s lifetime and only comes into effect if certain events occur—most commonly the death of one or both parents.
We most often recommend testamentary trusts for parents with minor children. While there may be no immediate need to establish a trust to own assets today, a testamentary trust provides an important safeguard if a parent passes away unexpectedly.
Without a testamentary trust, assets that pass through a will may ultimately go directly to children once they reach the age of majority—often age 18—which may not be an ideal outcome for many families.
Why Testamentary Trusts Are Commonly Used for Minor Children
If parents pass away and assets are distributed outright:
Children may receive full control of their inheritance at a very young age
There may be no structure for oversight or guidance
Assets may be spent quickly or unwisely
A testamentary trust allows parents to maintain control beyond their lifetime.
With a properly designed testamentary trust:
All assets from the estate flow into the trust
A trustee is named to oversee the assets
Funds can be distributed for:
Health and medical needs
Housing and shelter
Education and tuition
Day-to-day living expenses
General well-being
At the same time, children may not receive control of the trust principal until they reach specific ages chosen by the parents—such as 25, 30, or 35—which is often a more responsible and intentional approach.
Separating Guardianship and Financial Oversight
When parents have minor children, they typically name a guardian in their will to care for the children.
A testamentary trust allows parents to decide whether:
The guardian (who provides day-to-day care), and
The trustee (who manages the money)
are the same person or two different people.
This flexibility can be valuable. For example:
A guardian may be wonderful at raising children
Another individual may be better suited to managing finances
Parents can structure their estate plan in a way that best reflects their family dynamics and trusted relationships.
A Cost-Effective Trust Solution
One of the advantages of a testamentary trust is that it is generally less expensive than establishing a trust during your lifetime.
Because the trust:
Does not exist until a triggering event occurs
Does not require ongoing administration during your lifetime
Does not require annual tax filings while you are alive
It avoids many of the costs associated with living trusts, such as ongoing legal fees and administrative requirements.
Despite being cost-efficient, a testamentary trust can still provide meaningful control and protection for children.
Peace of Mind Through Advance Planning
A testamentary trust does not mean parents expect something to happen—it means they are prepared if it does.
This type of planning:
Protects children from receiving assets too early
Ensures financial resources are available for their care
Provides structure during a difficult time
Honors how parents would want assets used after their passing
For many families, this planning offers significant peace of mind.
The Importance of Working With an Estate Attorney
When creating a testamentary trust, we strongly recommend working with an experienced estate attorney.
Testamentary trusts are not as simple as drafting a basic will. The trust language must be carefully built into the will to clearly define:
How the trust operates
Trustee powers and responsibilities
Distribution standards
Timing of principal distributions
What happens if a trustee cannot serve
Poorly drafted language can lead to confusion, disputes, or unintended outcomes.
Our Role in Testamentary Trust Planning
At Greenbush Financial Group, we help parents:
Decide whether a testamentary trust is appropriate
Determine distribution ages and guidelines
Understand tax and planning implications
Coordinate financial planning decisions with estate attorneys
We help create the blueprint, so the attorney can draft documents that accurately reflect your wishes.
Our Testamentary Trust Articles
Frequently Asked Questions About Testamentary Trusts
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What is a testamentary trust?A testamentary trust is a trust created within a will that becomes effective only after the death of the person who created the will.
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When does a testamentary trust go into effect?It only goes into effect after a triggering event, typically the death of one or both parents.
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Why are testamentary trusts commonly used for children?They allow parents to control how and when children receive their inheritance, rather than giving full access at age 18.
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Who manages a testamentary trust?A trustee named in the will manages the trust and distributes funds according to the trust terms.
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Can the guardian and trustee be different people?Yes. Parents can appoint one person to care for the children and another to manage the finances.
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Are testamentary trusts expensive to set up?They are generally less expensive than living trusts because they do not exist or require administration until after death.
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Do testamentary trusts require special tax filings while I’m alive?No. Because the trust does not exist yet, there are no ongoing tax filings or administration during your lifetime.
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Should I work with a financial planner before setting up a testamentary trust?Yes. Financial planning helps determine asset levels, distribution goals, and trustee responsibilities before legal documents are drafted.
Contact Us . . . .
All of our services start with a complimentary consult. No high pressure sales tactics. We are financial planners, not salesmen.
About Our Firm: Greenbush Financial Group is an independent registered investment advisory firm based in Albany, New York, that provides four main services to clients: fee-based financial planning services, investment management, employer-sponsored retirement plans, and retirement planning services. The firm serves clients locally in the Albany region and virtually across the United States.
