Testamentary trusts, also known as “trusts under a will,” are becoming less common in estate planning due to various inefficiencies and complexities. Once a staple in many estate plans, these trusts are now often seen as outdated and cumbersome compared to other available options. In this article, we’ll explore the reasons behind the decline of testamentary trusts in Massachusetts and discuss why alternatives may be more suitable for modern estate planning needs.
What is a Testamentary Trust?
A testamentary trust is a type of trust created through a will, which only takes effect after the death of the person who made the will (the testator). The trust manages and distributes assets according to the terms outlined in the will. While they have served a useful purpose in the past, several factors now contribute to their decreased popularity.
1. Revisions Are Complex and Time-Consuming
Any modifications to a testamentary trust require a codicil—an amendment to the will. In Massachusetts, the execution of a codicil must meet the same legal requirements as a will, including signing and witnessing. This process can be time-consuming and inconvenient, especially compared to alternatives like living trusts, which are easier to update without such formalities.
2. Delayed Access to Assets
Assets in a testamentary trust may not be available to beneficiaries until after the Probate and Family Court has allowed the will and appointed both the personal representative (formerly the executor) and the trustee. This process can take several months, creating delays in the distribution of assets and potentially leaving beneficiaries without access to financial support during a difficult time.
3. Bond Requirement for Trustees
Under Massachusetts law, trustees of testamentary trusts are generally required to post a bond—a legal guarantee to ensure they fulfill their fiduciary duties. This surety bond is mandated unless the will specifically waives it, or the Probate and Family Court determines that a bond is unnecessary to protect the beneficiaries’ interests (as per G.L. c. 203E, § 702). The bond requirement adds another layer of complexity and expense to the administration of the trust.
4. Court Oversight: Delays and Costs
Before the Massachusetts Uniform Probate Code (MUPC) was enacted on March 31, 2012, testamentary trusts were subject to significant court supervision. The Probate and Family Court had oversight over various trust matters, such as the appointment of trustees, approval of successor trustees, and review of accounts. Although the MUPC and the subsequent Massachusetts Uniform Trust Code (MUTC) have streamlined some procedures, testamentary trusts still face more court involvement compared to living trusts.
Even post-MUPC, trustees appointed under testamentary trusts may still be bound by pre-MUPC bond obligations unless the court modifies them. This ongoing court oversight can increase administrative costs and delay the implementation of the trust’s provisions.
Why Alternatives Are More Appealing?
Due to the challenges associated with testamentary trusts, many individuals now prefer living trusts (also known as inter vivos trusts) for estate planning. Living trusts offer more flexibility and allow assets to be transferred without going through probate, resulting in faster distribution to beneficiaries. Additionally, living trusts can be updated more easily, without the need for formal codicils or the court’s involvement.
Another key advantage of living trusts is that they often provide immediate access to assets, which is especially beneficial when beneficiaries require financial support soon after the testator’s death.
Conclusion
The complexities and delays involved in testamentary trusts make them less appealing for modern estate planning in Massachusetts. For individuals seeking a more efficient and flexible solution, living trusts offer significant advantages, including faster asset distribution and less court oversight. When designing an estate plan, it’s important to consider these factors and choose the trust option that best fits your needs.
For those considering a testamentary trust, it may be worth exploring alternatives like living trusts to ensure your estate plan provides the maximum benefit to your beneficiaries with minimal delays and costs.
