What is the purpose of a testamentary trust?

The purpose of a testamentary trust is to manage assets according to the wishes of the deceased. This type of trust is created through a will and comes into effect upon the death of the individual who created the will (the testator). By establishing a testamentary trust, the testator can designate specific conditions under which the assets will be distributed or managed, ensuring that their intentions regarding how and when beneficiaries receive their inheritances are honored.

The trust provides a structured way to handle the assets, which may include directing distributions at certain ages or stages in life, or specifying that funds be used for particular needs such as education or healthcare. This can be particularly beneficial in managing the financial affairs of minor children or beneficiaries who may not be capable of handling large sums of money responsibly. By doing so, the testamentary trust helps fulfill the testator's goals for their estate, contributing to the overall purpose of estate planning.