What are the differences between an active trust, standby trust, insurance trust, and testamentary trust?
A standby trust is a trust that is already established but holds minimal Trust Property until more assets are transferred into it, either through a Will, a Lasting Power of Attorney, or active funding by the settlor.
The settlor is the person who establishes the trust by transferring assets into it.
An active trust is a trust that is already established and currently holds some or all of the Trust Property, which is managed by the Trustee. The trust can be further funded subsequently, through a Will, a Lasting Power of Attorney, or active funding by the settlor.
An insurance trust is typically a type of active or standby trust funded solely by insurance policies. Trust companies generally charge less for them as compared to an active or standby trust that holds a variety of assets.
A testamentary trust (sometimes known as a Will Trust) is a trust that is only established upon the death of the testator; it does not exist until the testator has died. The trust cannot be funded while the testator is alive (as the trust would not have existed).
The testator is the person who creates a Will. In the case of a testamentary trust, the testator is also the settlor because the trust is established based on the testator's Will and funded with the testator's assets after their death.
A standby, insurance, or active trust has the advantage of being more flexible as they are already established, allowing funds to be transferred into the trust in non-death situations (e.g., if the settlor is in a coma).