Living and Testamentary Trusts

//Living and Testamentary Trusts

Living and Testamentary Trusts

“The best time to plant a tree was 20 years ago. The second best time is now.”

-Chinese Proverb

Anyone who has been surrounded by loved ones, or who has pursued their passion, can attest to the fact that one of the greatest human gratifications is to leave behind a lasting legacy for the people and causes we love the most.

How then can you make sure that the fruit of your labour 20 years from now will fulfil your wishes for those dearest to your heart, no matter where you are?

Answer: By taking advantage of the legal wonder that is the arrangement of Living and Testamentary Trusts!


A Living Trust (also known as Inter-vivos Trust) is a legal arrangement created during the lifetime of an individual (the Settlor), where a designated person (the Trustee) is given responsibility for managing the Settlor’s asset for the benefit of designated beneficiaries. (See UTL’s previous article: Trust Arrangement, A viable means of Wealth Preservation and Transfer for a detailed explanation of Living Trust).


A Testamentary Trust (also known as a Will Trust) is a Trust arrangement inserted in a Will for the benefits of beneficiaries upon the death of the Testator (maker of the Testamentary Trust). This type of Trust is usually instituted by the Executors (persons who administer the Will). The Executors of the Will, in most cases of Testamentary Trust, would also be the Trustees of the Trust in the Will.

A fun fact: A Will can have more than one Testamentary Trust covering different parts of the estate!

A Testamentary Trust is appropriate where a person understands that upon their demise, a Will alone is not adequate to deal with the complexities of their affairs. Such complexities may include:

  1. Aged Parents, Child born out of Wedlock, or Dependants

    Where a person has aged parents, dependants who may not be able to cater for themselves, or a child who was born out of wedlock and may not be on good terms with other principal beneficiaries, a Testamentary Trust can be inserted in the Will with specific instructions given to the Executor/Trustee on the welfare of such beneficiaries.

    In the legal matter of Nelson v. Akofiranmi for instance, the Testator had only one daughter by his lawful wife who had died over 35 years earlier. After his wife’s death, he had taken for himself under native law, another wife for 28 years before the time of making his Will. The daughter was however not on good terms with her stepmother. In order to prevent contention upon his death, the Testator on his sickbed had his Will executed before his daughter, second wife and three other witnesses. Notwithstanding, the daughter proceeded to shut her stepmother out of the inheritance upon her father’s death. She denied the validity of the stepmother’s bequest under the Will and claimed her father was ill and mentally unsound when he made the Will. Although the court rejected the daughter’s argument and upheld the Will as valid after a lengthy litigation, a will alone was not sufficient to spare his family the ordeal the Testator tried to prevent.

    To prevent contention in such situations, the Testator may insert a Testamentary Trust in the Will, thereby placing the responsibility of the welfare of additional beneficiaries on the Executor/Trustee rather than on other principal beneficiaries.

  2. Spendthrift Beneficiaries, Minors and Physically Challenged children.

    In some cases, a Testator has a spouse or a child that is reckless with money. In such a situation, the Testator may be uncomfortable bequeathing property to the beneficiary, especially where other beneficiaries are minors or physically challenged and must be cared for.

    In order to prevent the Spendthrift Beneficiary from depleting the entire bequest to the detriment of other beneficiaries, a Testamentary Trust may be inserted in the Will, placing the responsibility of other beneficiaries, and/or even the spendthrift beneficiary, on the Executor/Trustee.

  3. Property Maintenance

    A Testator might have certain property that they do not wish to sell or abandon upon their demise. It may be a family house, a statue, an ancestral graveyard, or other heirlooms of sentimental value.

    In such a situation, the Testator may insert a testamentary trust, placing the responsibility of periodic maintenance of the property on the Executor/Trustee. Where the property is a family house or other exotic buildings, they may instruct the Executor/Trustee to collect rents upon their death and distribute the collected rents to designated beneficiaries.

  4. Business Management

    Having built a successful business, firm or partnership, a person may sometimes have children who lack the professional or business qualities necessary to keep the business afloat, or who may have areas of interest and passion completely different from that of the Testator.

    In such circumstances, the Testator may insert a testamentary trust appointing the Executor/Trustee in a supervisory capacity to ensure professional management of the business so that it does not fold up following the Testator’s demise. This may even include instituting or defending against postmortem lawsuits.

  5. Charity

    A philanthropist may intend that their generous donations to certain causes continue upon their death. This may include educational sponsorship of certain classes of persons, donations to institutions of which the Testator was an alumnus, or even faith-based donations amongst others. A Testamentary Trust may be inserted in a Will to ensure that these obligations continue upon the demise of the Testator.

Where the philanthropist is a Muslim, the Testamentary Trust must not cover more than 1/3 of their entire estate under the Faraid rules of distribution. (See UTL’s previous article: What Every Nigerian Muslim Should Know about Writing a Will (Wasiyyah) for a detailed explanation on writing a Muslim Will).


As the name implies, a Living Trust allows the Settlor benefit as a beneficiary from the Trust in their lifetime, while entirely passing the property to other beneficiaries upon their demise. Conversely, a Testamentary Trust only comes into operation after the demise of the Testator. Until a Testator passes on, the Testamentary Trust remains a mere declaration.

Accordingly, a Living Trust allows the Settlor to bypass the often expensive legal process of Probate, since Living Trusts are not subject to this process. A Testamentary Trust, however, draws its life from a Will and is therefore subject to the Probate court, which oversees the Trustee’s handling of the trust.

The decision of whether to make a Living Trust or to create a Will with a Testamentary Trust should be driven by the peculiar needs of your beneficiaries and the specific results you seek in the management of your estate.

Either way, now is a good time to start.

NB: For additional details on creating a Living or Testamentary Trust, visit UTL Trust Management Services Limited here.

2020-09-13T12:18:12+00:00 September 13th, 2020|0 Comments

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