How does a testamentary trust work?

A testamentary trust doesn't exist until the person passes away, meaning the trust is essentially part of a set of instructions within a person's will to be drafted by a predetermined representative called an executor or executrix. The deceased's assets will be transferred into the newly created trust only after the person has passed away.

What are the benefits of a testamentary trust?

With a testamentary trust, assets can remain protected until the child is old enough to be financially responsible. Another advantage of a testamentary trust is that you can fund it with life insurance proceeds after death. To do this, the settlor must list the beneficiary of the life insurance policy as the trustee of the trust.

What is a testamentary trust in Canada?

Testamentary trusts are one of the two types of trust funds allowed by Canadian law. The second form is the inter-vivos trust. A testamentary trust is a trust that is to contain a portion or all of a decedent's assets outlined within a person's last will and testament.