Would a Revocable Living Trust fit my family’s needs better than a Testamentary Trust?

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Understanding the difference between types of trusts can guide you in selecting the one that best meets your needs.

A revocable living trust is a trust that is established during your lifetime. You would be the Trustor – (the person who creates the trust and transfers assets into trust ownership.) The trust would also have a Trustee responsible for managing assets owned by the trust. You can act as your own trustee or have a trusted family member or friend serve. Lastly, the trust has beneficiaries. You would likely be the lifetime beneficiary of your trust. This means you would receive income and principal from the trust as directed by the terms of the trust. There are also remainder beneficiaries. Remainder beneficiaries are the persons and/or charities who would receive the balance of the trust assets after you pass away.

testamentary trust comes into existence at your death. You, as Trustor, would have provisions in your will forming the trust and directing some portion of your assets be used to fund the trust. This type of trust also has a trustee and beneficiaries.

If you have a revocable living trust your trust or Pour over Will may contain a testamentary trust. If you intend to benefit minor children or grandchildren you may want to have that beneficiary’s share go into a testamentary trust or sub trust rather than to the minor directly. A gift to a minor at your death could require establishing a Conservatorship for the minor if your estate planning did not include provisions under the Uniform Transfer to Minors Act (UTMA) laws of the minor’s state of residence.

A special type of testamentary trust is a Special Needs Trust. If you have a child or grandchild with special needs you should consider special needs planning as part of your estate planning. Assets going into a special needs trust at your death will not disqualify the beneficiary from means tested benefits like Supplemental Security Income (SSI) and Medicaid. Assets going directly to the special needs child would disqualify the child from means tested benefits until the assets had been spent down to the $2,000 resource limit for eligibility.

An experienced estate planning attorney can help you understand the different types of trusts and their uses and assist you in establishing the trust most appropriate for your needs. Contact the Estate Planning attorneys with the Law Offices of Nay & Friedenberg in Portland, Oregon at (503) 245-0894 to set an appointment.

If you would like to learn more about your estate planning options, click here to receive our FREE Legal/Financial Planning Guide.