Definition
An Inter Vivos Trust, commonly referred to as a living trust, is a trust that is created and takes effect during the lifetime of the settlor or grantor (the person who creates the trust). This type of trust is typically used for effective estate planning and managing assets for the benefit of beneficiaries, such as children or other family members.
Examples
- Family Trust: A father establishes a family trust to manage and protect assets intended for his children, ensuring the assets are used for their education and other expenses while he is still alive.
- Revocable Living Trust: An individual sets up a revocable living trust that allows them to manage and use their assets. They can make changes to the trust’s terms or even revoke it as long as they are alive.
- Irrevocable Living Trust: A person creates an irrevocable living trust to remove asset ownership, thereby reducing estate taxes and protecting assets from creditors, while still benefiting heirs.
Frequently Asked Questions (FAQs)
What is the main difference between an Inter Vivos Trust and a Testamentary Trust?
Inter Vivos Trusts are established and effective during the grantor’s lifetime, whereas Testamentary Trusts only take effect after the grantor’s death, as specified in their will.
Can an Inter Vivos Trust be changed or revoked?
Yes, if it is a revocable trust. The grantor can modify or revoke the terms of the trust during their lifetime. However, an irrevocable trust cannot be changed after it is established.
Why use an Inter Vivos Trust?
Inter Vivos Trusts are used to manage and protect assets, avoid probate, reduce estate taxes, and ensure that assets are managed according to the grantor’s wishes during their lifetime and after their death.
How is an Inter Vivos Trust funded?
The grantor transfers ownership of their assets, such as property, stocks, or bank accounts, into the trust. This process is known as “funding the trust.”
Who manages an Inter Vivos Trust?
A trustee, appointed by the grantor, manages the trust according to the terms specified in the trust document. The grantor can also be the trustee.
Related Terms
- Testamentary Trust: A trust that goes into effect upon the death of the person who created it, through their will.
- Grantor (Settlor): The person who creates the trust.
- Trustee: The individual or entity responsible for managing the trust according to its terms.
- Beneficiary: The person or persons who benefit from the trust.
- Revocable Trust: A trust that can be altered or terminated by the grantor during their lifetime.
- Irrevocable Trust: A trust that cannot be changed once established, intended to permanently remove control and ownership from the grantor.
Online References
Suggested Books for Further Studies
- “Living Trusts for Everyone: Why a Revocable Living Trust is Right for You” by Ronald Farrington Sharp
- “Make Your Own Living Trust” by Denis Clifford
- “The Complete Book of Wills, Estates & Trusts” by Alexander A. Bove Jr.
Fundamentals of Inter Vivos Trusts: Trusts and Estate Planning Basics Quiz
Thank you for deep-diving into Inter Vivos Trusts and tackling our specially designed quiz to test your comprehension. Understanding how such trusts function is essential for robust estate planning!
