What is a testamentary trust?
A testamentary trust is a type of trust established in a will upon the death of the trustmaker (also known as the testator). This type of trust is typically created to manage and distribute a deceased person’s property according to the instructions that they left behind in their will. Testamentary trusts are regulated by the state law of the trustmaker’s residence at the time of their death, including Inheritance Law in Hawaii. The trustmaker’s instructions, or terms, specify how the trustee should invest and distribute assets for the benefit of the trustmaker’s beneficiaries. The trustee is a person or an institution (such as a bank or trust company) who is appointed to manage and implement the trustmaker’s instructions. The trustee must adhere to the terms of the trust and must act solely in the beneficiaries’ best interests. The testamentary trust can last for many years after the trustmaker’s death, and can help protect the beneficiaries’ inheritance from creditors by keeping it in the trust for as long as it is legally required. Assets held in the trust may also be subject to estate taxes, depending on the size of the trust. In Hawaii, the law regarding testamentary trusts is designed to ensure that the trustmaker’s wishes are carried out in a fair and efficient manner.
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