It clearly identifies an ownership interest under the terms of a will as opposed to a revocable or irrevocable living trust. It indicates that another document, the will, exists to explain the specifications of the interest.

Types of UWO Trusts

Below are two circumstances under which you might encounter a UWO designation:

  1. A trust agreement might read, “Jane Doe Credit Shelter Trust UWO John Doe.”
    This refers to the “B” Trust of an AB trust estate plan, which has been established for the benefit of Jane Doe under the terms of John Doe’s last will and testament. It indicates a shelter trust exists because of the terms of John’s will. An AB trust is one formed by spouses to get the most from available federal estate tax exemptions. Each spouse leaves his or her property to an irrevocable trust, A or B. The assets are not subject to estate taxes when the first spouse dies, nor are they taxable when the second spouse dies. Ultimately, it transfers to other beneficiaries. The property can be used for the benefit of the surviving spouse during their lifetime, but they do not technically own it.
  2. Another example is, “Jane Doe Generation-Skipping Trust UWO John Doe.”
    This refers to a trust exempt from generation-skipping transfer taxes, established for the benefit of Jane Doe under the terms of John Doe’s last will and testament. A generation-skipping trust transfers assets to grandchildren rather than to trustee’s children – another means of avoiding estate taxation. Both of those examples involve complicated rules best explained by an estate planning attorney, and both are testamentary trusts.

How a Testamentary Trust Works With a UWO

A testamentary trust is a part of a UWO trust created when the testator, or person making the will, directs a will with some or all of the property moving to one or more trusts at the time of death. The trust does not exist until the executor or personal representative of the estate forms it according to the wishes contained in their will. Assets are still subject to probate, which is avoided when a descendant’s property is placed within a living trust without an intermediate step. Probate is required to transfer the property from the decedent’s ownership into the ownership of the trust after his death.