Trust Administration

Testamentary Trusts

Revocable Trusts

Although the focus of VirginiaEstateLaw.com is probate and the administration of decedent's estates, testamentary trusts are often involved in that process.

A trust by general definition is created when property is given or entrusted to one to be used or cared for in the interest or benefit of another.

The person establishing the trust is referred to as the "trustor," the person entrusted with the property and the duties of the trust is the "trustee," and the person benefiting from the trust is referred to as a "beneficiary."

A testamentary trust is normally created in a testator's will. It is often used to provide for management of property passing to minor children under a decedent's will until the children reach the age provided in the will. Testamentary trusts may also be used to achieve certain estate tax planning objectives and other purposes.

Testamentary trustees are required to qualify with the court in essentially the same manner as personal representatives of a decedent's estate. Bond with corporate surety will be required unless waived by will or by statute in some cases.

Testamentary trustees, like personal representatives, are fiduciaries and must act with the utmost fidelity and in accordance with the terms of the trust and applicable law. Failure to do so can result in personal liability for the trustee.

Testamentary trusts, like decedent's estates, are subject to supervision by the court. The trustee must file an inventory and annual accountings with the Commissioner of Accounts, who audits the filings and reports to the court.

Testamentary trusts may provide for distributions of income to be made by the trustee for a trust beneficiary for a period of time, perhaps the beneficiary's lifetime, with the remaining trust assets to go to another beneficiary (often referred to as the "remainder beneficiary").

In such instances, it is necessary for the trustee to allocate receipts and disbursements of income and principal in accordance with the Virginia Uniform Principal and Income Act, and document such allocations in their fiduciary accountings. This requirement is intended to provide for fairness regarding the interests of both the current income beneficiary as well as the eventual remainder beneficiary.

Unlike decedent's estates, the filing of inventories and accounts with the court may be waived by appropriate language in a decedent's will and by following certain procedures to document the exercise of the waiver.

A testamentary trustee has many duties similar to personal representatives. They must take possession and control of the assets, manage, control and disburse the assets in accordance with the terms of the trust, invest the assets in appropriate ways, maintain records and accountings (even if court accountings have been waived), file required income tax returns, and perform other duties as provided in the trust and under the law.

Revocable Trusts >>>