What is a testamentary trust and how does it work?

A testamentary trust is a type of trust that takes effect after the death of the person who created it, sometimes called the “grantor.” The trust is documented in the grantor’s last will and testament. The trust agreement outlines the instructions for how the trust’s assets are to be managed and distributed. In Arizona, testamentary trusts can be used to provide for a minor or significantly disabled beneficiary. The trustee is the person appointed in the trust to manage the trust assets. This individual has a fiduciary duty to act in the best interest of the beneficiary. The trustee is responsible for following the grantor’s instructions outlined in the trust document. A testamentary trust can own property, invest assets, and provide income to the beneficiaries. The trust assets are usually managed according to the grantor’s instructions. The trustee must follow state and federal laws when investing the trust assets. The trustee can also invest the trust assets according to a separate investment strategy outlined within the trust document. Once the terms of the trust are met, the trust assets are distributed to the trust beneficiaries. In Arizona, trust distributions may be taxed differently from regular income. It is important to consult with an estate planning attorney to understand the tax implications of a testamentary trust.

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What is a testamentary trust and how does it work?

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