Testamentary Trusts
--
Meet Phil and Alice
What
it is
A will can have
a trust written into it, called a testamentary trust, which is set
into motion by the court after the will reaches a certain point
of execution, and is used only after the death of the person whose
estate it represents (grantor). It is an irrevocable trust, in that
it only exists after the grantor's death.
A testamentary
trust can provide all the after death benefits of a living
trust but none of the benefits that a living trust provides
during a grator's lifetime, as a testamentary only comes into force
after death. Also, should the grantor become incapacitated, a testamentary
trust would not provide benefits to the grantor.
An advantage
of a testamentary trust is that it can be less expensive to have
drawn up by legal counsel than a living trust, especially if there
are unusual circumstances in how the assets would be controlled
by the testamentary trust.
How
it Works
Phil
and Alice had often put some of their savings into the stock market.
One of their first charitable gifts had been a gift
of appreciated stock. They were also employed by companies that
had 401k plans. They kept investing and the value of their plans
kept growing.
Phil:
"It really has been a wonderful ride. Our first experience
was giving several hundred shares of a stock that had more than
doubled in value. We needed some help that year with our tax situation
and that gift was a great idea. Also, our tax-sheltered retirement
plans kept growing and just recently we rolled them into our IRAs.
They have grown beyond our wildest dreams."
Alice:
"But taxes will eat up so much of it. Not that we need it all, but
we were hoping to get more value out  of
it."
Phil:
"We found a way to do everything we wanted - have access to the
principal if we need it and, when we're gone, provide both income
for our kids and a nice gift for those who need it. Our attorney
told us about a testamentary charitable remainder trust funded with
the assets that remain in our IRAs after we're gone."
Alice:
"Tax benefits, protecting our family, and knowing we're making
a difference in other peoples' lives - it feels good!"
A testamentary
trust only becomes effective and irrevocable at the time of your
death. For Phil and Alice, a beneficiary designation in their IRAs
will transfer the remaining assets at their death (second to die)
into the testamentary charitable remainder trust.
The results
are that the assets remaining in the IRAs at their deaths will not
incur any income tax liability going into the trust and a nice future
gift for the charitable organization is established. In addition,
a taxable income stream for their heirs is created and some estate
taxes may be saved.
There may be
changes in the way distributions are structured when designating
a charatable remainder trust as the beneficiary of an IRA. Individual
circumstances will vary - as with all tax and estate planning, please
consult your attorney or estate specialist.
As we said earlier,
there are as many ways to support Saint Mary's College as there
are needs for your support. Please contact
us should you have questions or if you would like to discuss
your personal circumstances to see how you can enrich your heart
as many others already have. The following
page has some further thoughts about joining the family of support
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