Legal Question in Wills and Trusts in Washington

Re: Please explain what a testamentary trust means.

Testamentary trusts are merely trusts that are created upon the death of an individual. Typically, the decedent's Will directs the executor/personal representative to create a trust with all or certain assets of the estate. It sounds like in your parents' case they have directed for certain assets to be placed into trust. If assets have already been placed into trust the trust is referred to as a "living" trust as opposed to a "testamentary" trust.

While trusts (both living and testamentary) can be set up for various reasons (holding funds for a minor, ensuring that assets are ultimately distributed to offspring, etc.), a popular use of testamentary trusts is to reduce estate tax liability of a couple's combined estate. The testamentary trust set up at the death of the first spouse allows for each spouse to use his/her unified credit against estate tax. It is often the case that without such a testamentary trust one of the spouse's unified credit (the first to die) is wasted.

As to how the trust plays out, the trust continues until some event provided in the trust is triggered and the trust terminates. What typically occurs is that the trust is created upon the death of the first spouse, continues for the benefit of the second spouse (income only) until the death of the second spouse at which point the trust terminates and the trust proceeds are distributes pursuant to the terms of the trust or Will.

I hope this helps.