One of the reasons why young people who don’t have a lot of assets need to have an estate plan in place is to make sure that their children are provided for should both parents perish together in an accident. You may say that if they don’t have any resources they will have nothing to pass along for the benefit of the children. This is true, and that’s why it is important for people in this situation to carry enough life insurance coverage to provide for the long term needs of their dependents.
Of course you can’t bequeath these insurance policy proceeds directly to the children, so the way that this is normally handled is through the creation of a testamentary trust. We have all heard the term “last will and testament,” and both of these terms are describing a document that achieves the same purpose. In days gone by the will distributed the real property and the testament was used for personal property distribution, but the term no longer implies these distinctions. So a testamentary trust is literally a trust contained within a testament or will.
To use a testamentary trust to provide for your children you would create the vehicle while you are drawing up your will. You have to appoint a trustee to administer the funds, and this is of course a very important decision. The trustee will be handling the funds for the duration of the trust term, which may be until the children reach a certain age or until they complete their education. The trustee will also have to regularly meet with the probate court who will review his or her administration of the trust. This is a long term commitment and it can be time consuming, so it is important to select a trustee who is cognizant of this and fully willing to undertake the responsibility.