What is a testamentary trust?

• A. A trust created by will.
• B. A trust created during the grantor's lifetime.
• C. A trust for the sole purpose of paying dividends.
• D. A trust created by court decree.

Answer: (A)

A testamentary trust is a trust that is created by a will and comes into existence after the testator’s death, funded from the decedent’s probate estate. The will sets forth the trust terms, including who will be the trustee, who the beneficiaries are, and how the assets should be managed and distributed. Because it’s created at death, it does not exist or function while the grantor is alive, unlike a living (inter vivos) trust that is created and funded during the grantor’s lifetime. This is distinct from a trust that is established by court decree, which is created by an order of the court, not by a will.