Is documentary proof required in estate planning?

Discovering a last will and testament in an old artifact, book or other hiding place may make for great drama in a movie. However, it’s not recommended for prudent estate planning. 

Readers may recall some of our planning advice in recent posts about revocable and/or irrevocable trusts. Setting up a trust can accomplish many estate-planning goals, not the least of which may be avoiding the scavenger hunt scenario described above. 

Yet a recent story reminds us that even in a technological age, documentation may still be required. Specifically, an individual tried to set up a bank account to receive payments from a trust created by his parents for their grandchild. The trust had been set up in their will. However, bank staff requested a copy of the trust agreement. The catch: there was no trust document separate from the will. 

Although the bank personnel may have been unfamiliar with this scenario, an attorney that focuses on wills and trusts knows that this type of instrument is called a testamentary trust.

Since the trust was contained in a will, it is an exception to the general rule that trusts don’t have to go through probate. The probate court will examine the settlor’s instructions and transfer property into the testamentary trust as part of the probate process. Unlike a living trust, a testamentary trust provision in a will is not actually created until after the probate process. If a bank or other financial institution still insists on paper documentation, an order from the probate court would probably satisfy the bank. 

Related Posts: “Trusts Can Serve Many Estate Planning Goals,” Aug. 29, 2014; “When Considering a Trust, Take a Look at Non-Probate Assets,” Sept. 12, 2014

Source: The Times, “How to navigate trusts found within wills,” Christopher W. Yugo, Nov. 9, 2014

Source: FindLaw, “Trusts: An Overview

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