A testamentary trust is an express trust that is written into a Will but will only be setup after the testator dies and when the Grant of Probate is granted. If the estate is insolvent after all debts are paid, the testamentary trust cannot be setup.
Majority of the Wills written are already creating implicit trust. For example, if you give $X to your children who are still minors, this money has to be held by the Executor/Trustee until they are of legal age. Thus, an implicit trust is created. Take for another example if you give $Y to your elderly parents but if they are already suffering say from severe dementia, they are not able to hold the assets. Hence, the Executor/Trustee has to hold on their behalf and thus an implicit trust is created. Many simple Wills that people use will have the tendency to create numerous implicit trusts. To me, having an implicit trust created – while technically is not wrong – is practically unwise. As a financial practitioner, my opinion is that this increases the risk of monies being mismanaged because the Executor/Trustee does not have any guideline as to how to manage such implicit trust. The worst case scenario could happen is to see the Executor/Trustee squandering the money away or having to be cheated by unethical financial salesperson to buy into another Lehman Brother Minibond. Now that there is a casino next door, the Executor/Trustee could try his luck to “invest” some monies on the gambling den – with YOUR money meant for your young children.
To counter the creation of implicit trusts – unintentionally or intentionally – it is better to explicitly spelt out the exact guidelines which the trustee must follow under a testamentary trust. And for goodness sake, never appoint a human being to be a trustee. That human could simply just ignore the entire testamentary trust and still be able to gamble it away at the casino next door.
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