A testamentary trust is alternatively referred to as ‘Will Trust’. A testamentary trust arises on the death of the testator under his Will. Testamentary trusts are different from ‘inter vivos’ trusts, which the author or the settler of the trust creates during his life time.
In a testamentary trust since the settler is already deceased, he cannot have any say over the trustee’s exercise of discretion except to the extent of terms and conditions of trust already specified in the Will, which is the instrument behind creation. However, in some jurisdictions or states it is customary for the testator to leave behind a letter of wishes for the trustees of the testamentary trust that would arise in future on his death under the stipulations in his Will.
While testamentary trusts are driven by considerations of welfare of the beneficiaries, creation of ‘inter vivos’ trusts are actuated by prospects of tax benefits.
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