What is an Inter-Vivos Trust?

An inter-vivos trust is a fiduciary relationship used in estate planning created during the lifetime of the trustor. Also known as a living trust, this trust has a duration that is determined at the time of the trust's creation and can entail the distribution of assets to the beneficiary during or after the trustor's lifetime. The opposite of an inter-vivos trust is a testamentary trust, which goes into effect upon the death of the trustor.

Understanding Inter-Vivos Trust

An inter-vivos trust is important because it helps avoid probate, a process of distributing the deceased's assets in court. This process can be lengthy, costly and also expose a family's private financial matters by making them a matter of public record. A properly established trust helps ensure assets go to their intended recipients in a timely and private matter.

Key Takeaways

  • An inter-vivos trust is a living trust created that holds assets of a trustor.
  • The main benefit of an inter-vivos trust is that it helps avoid probate, a process in which a court divvies up assets for an individual after his or her death.
  • The trustor (s) can be the trustee in an inter-vivos trust during their lifetime or until a backup named in the trust is allowed to takeover.

How an Inter-Vivos Trust Works

An inter-vivos trust is an estate planning vehicle that can own the assets during the trustor’s lifetime. The primary purpose of establishing a living trust is to make assets more easily transferable to the trustor’s beneficiaries without the encumbrance and expense of probate proceedings. In addition to eliminating the expense and delay of probate, a trust can also ensure the estate is settled without the publicity of probate. The ultimate benefit for the surviving family is the transfer of assets is conducted in a smooth and efficient manner to prevent any disruption in their use.

While living, the trustor, or trustors in the case of a married couple, can be the trustee, managing the assets until they are no longer able, at which time a named backup trustee assumes the duties. A living trust is revocable, which means any of the provisions and designations can be changed while the trustor is alive. It becomes irrevocable after the death of the trustor.

Setting up a Trust

In establishing a trust, the grantor names the trust parties, which include the grantors, typically the husband and wife; the beneficiaries; and the trustee. In most arrangements, the spouses are named as trustees. However, a contingent trustee should be named in the event both spouses die.

Just about any asset can be owned by a trust. Assets such as real estate, investments and business interests can be re-titled in the name of the trust. Some assets, such as life insurance and retirement plans pass to a designated beneficiary so they need not be included.

In addition to assigning assets to specific beneficiaries, a trust can include instructions for the trustee to guide the timing of distribution and management of the assets while they are still held by the trust.

A will is needed to execute the trust. Essentially, the trust becomes the primary beneficiary of a will. In addition, a will acts as a “catch-all” mechanism that determines the disposition of assets that might have been excluded from the trust. It is also the will that establishes guardianship for minor children.