A testamentary trust is a type of trust, often created for minor or young adult children when the parent or parents’ death might distribute large funds, as with life insurance, to the children. The testamentary trust is created after the parent’s death, and will involve appointing a trustee to look after the funds in the trust, until a given point when the trust expires, such as when a person finishes college or turns 25 years of age. The upfront cost of setting up a testamentary trust is usually very low.

Often, people who want to create the testamentary trust do so to protect minor children or a relative with disabilities who will inherit large sums of money disbursed at the person's death. Depending upon the number of years for which the trustee must act for a testamentary trust, he or she will need to go to probate court and have the trust regularly checked over by the courts. Because of this, testamentary trusts can end up costing much more in legal fees than do revocable living wills. If the trustee needs frequent legal advice on how to administer the trust, this can mean huge legal fees over time, which is usually deducted from the trust amount.

For this reason, most attorneys advise people to create a revocable living will rather than depend upon the creation of a testamentary trust. On the other hand, if both parents or a single parent has a very high life insurance disbursement, and little in the way of ready money, the testamentary trust may be the only method by which people will be able to dictate some terms for providing for their children if they suddenly die.

Creation of the testamentary trust also means that a person must act as a trustee until the trust ends. Such a person can be appointed in a will, but some will not take up the act, since it can be time consuming. In the event that no trustee is appointed, one may be court appointed, or people or friends of the children involved might volunteer to act as the trustee. It is better to discuss with trustworthy friends and family exactly who will act as guardian and trustee in the event of your death.

Before the children have full disbursement of trust funds, their money will be inherited and handled by the appointed trustee, and this work will be overseen by probate courts. This should insure that money matters are handled appropriately, but it’s still a good idea to appoint a trustee that you know you can count on to act in the best interest of your children. Once the money is handed to a trustee, control of it and the degree to which it may be spent on the care of children can’t really be controlled by a very short or non-specific will. A will can still make clear your wishes regarding expenditures, but the trustee, provided the probate court agrees, does not necessarily have to honor these wishes.