Living
vs. Testamentary Trusts
by
Herbert D. Hinkle, Esq.
Herbert D. Hinkle
Law Office
2651 Main Street
Lawrenceville, New Jersey 08648
(609) 896-4200 or (215) 860-2100
In my opinion
it is poor practice for attorneys to draft special needs trusts as
part of a client's will. Here is why:
A trust that is
included within a will is called a "testamentary trust."
It is not activated until the testator dies, and from that point on
is subject to control of the court where the will is probated.
This means greater legal fees and other costs when the will is probated,
and ongoing costs whenever there is a need to change trustees or account
for the administration of funds. Likewise, jurisdiction remains in
the county where probate occurred even though the beneficiaries and
trustees may live far away in other states.
Another big drawback
is that a testamentary trust cannot be used or funded by others while
the testator is living.
A much more useful
approach is to have the will pour into a separate living trust. This
avoids the problem outlined above and enables other family members
to contribute to the trust while the parents of a person with a disability
is alive.
Recently, I saw
a parent who had a special needs trust written into his will. He wanted
to purchase life insurance on his life and have the special needs
trust own it, to save estate taxes. The trust in the will was useless
and a new document had to be prepared. The so-called "special
needs trust" also had many shortcomings, but that is the subject
for another article.
Copyright 1999
H.D. Hinkle. All rights reserved.
Mr. Hinkle maintains
a multi-state law practice with offices in Lawrenceville, Florham
Park, and Marlton, NJ, and Yardley, Pa. Mr. Hinkle and his colleagues
Ira Fingles, and Paul Prior lecture and write frequently on topics
of law, aging, and disability, and are available
to speak to groups in New Jersey and Pennsylvania
at no charge. Call (609) 896-4200.
