An Inter Vivos Trust, also known as a Living Trust, is a type of trust that is created and funded during a person's lifetime. The trust is managed by a “trustee”, who holds and invests the assets for the benefit of the beneficiaries named in the trust document. Typically this Trustee is the same as the maker (also known as the Grantor) until a life event occurs where a successor needs to step in on their behalf. Unlike a Will, which only takes effect after a person's death, an Inter Vivos Trust can provide for asset management and distribution during a person's lifetime.
A major advantage of an Inter Vivos Trust is that it can help avoid probate, which is the legal process of distributing a person's assets after their death. By transferring assets to the trust during a person's lifetime, the assets can pass to the beneficiaries outside of probate court, saving time and money. Inter Vivos Trusts can also provide for asset management for beneficiaries who are minors or otherwise unable to manage the assets. Additionally, they can be structured in a way that minimizes estate and gift taxes.
You can think of an “Inter Vivos Trust” like a toolbox filled with Tools designed to fix issues that arise during disability, incapacity and at death. Yes, an Inter Vivos Trust can be considered a "toolbox" for handling various situations as it provides flexibility and control over assets for the benefit of the beneficiaries. The Trustee, as the "handyman," has the responsibility to use the tools in the toolbox (i.e. provisions in the trust agreement) to manage the trust assets, make investment decisions, distribute income and principal, and carry out the settlor's wishes. The trustee has the power to use the appropriate tool for each situation to serve the best interest of the beneficiaries.
Wills and Trusts are both important estate planning tools, but they each have their own unique advantages and disadvantages. While a Will is a straightforward way to dictate how your assets will be distributed after your death, a Trust offers several additional benefits that a Will cannot.
Avoid Probate: One of the biggest benefits of a Trust is the ability to avoid the probate process. Probate is a legal process that distributes a person's assets after their death, but it can be time-consuming and expensive. With a Trust, assets are transferred directly to the beneficiary outside of probate court, making the process quicker and more private.
Asset Management: Trusts can also be set up to manage assets for beneficiaries who are minors or otherwise unable to manage them. A Trust can provide ongoing management of assets, while a Will itself cannot.
Tax Savings: Trusts can restructure the lifetime ownership of assets in a way that minimizes estate and gift taxes, while Wills do not offer this benefit.
Privacy: The probate process is a matter of public record, meaning anyone can see the contents of a Will and the distribution of a person's assets. Trusts, on the other hand, are private agreements and do not go through probate, so their contents are not publicly disclosed.
Incapacity Planning: Another advantage of a Trust is the ability to provide for asset management and distribution in the event the grantor becomes incapacitated. A Will does not take effect until after death and does not provide for incapacity planning.
In conclusion, while both Wills and Trusts have their own unique benefits, a Trust offers several additional benefits that a Will cannot. It's important to work with a qualified estate planning attorney to determine which tool is right for your individual needs and to create an estate plan that addresses all of your estate planning goals. In some cases, a combination of a Will and a Trust may be the best solution.
