Define Inter Vivos Trust
Understanding the nuances of trust law is crucial when planning your estate. Among the different types of trusts, the inter vivos trust stands out due to its unique features and applications. This article explores what an inter vivos trust is, how it differs from other trusts, and the specific advantages and disadvantages associated with it.
What is the Difference Between a Trust and an Inter Vivos Trust?
A trust is a legal arrangement where one party, known as the trustee, holds and manages assets on behalf of another party, the beneficiaries. Trusts are broadly categorized into two types: testamentary trusts and inter vivos trusts. A testamentary trust is created as part of a will and comes into effect upon the death of the individual. In contrast, an inter vivos trust, also known as a living trust, is established by a grantor during their lifetime. This fundamental timing difference dictates how each trust operates and its implications for asset management and estate planning.
What is an Inter Vivos Trust?
An inter vivos trust is set up by a grantor while they are alive. It allows the grantor to transfer the legal title of their assets to a trustee, who then manages these assets for the benefit of the beneficiaries according to the trust’s terms. Inter vivos trusts can be either revocable or irrevocable, giving the grantor flexibility or permanency in how they wish to handle their estate planning.
What is the Difference Between Inter Vivos and Discretionary Trust?
While an inter vivos trust refers to when the trust is established (during the grantor’s lifetime), a discretionary trust refers to how the assets within the trust are managed. In a discretionary trust, the trustee has the authority to decide how the trust’s assets are distributed to the beneficiaries. This type of decision-making can also be applied within an inter vivos trust if it is set up as a discretionary trust. The key difference lies in the level of control and flexibility afforded to the trustee in managing the trust’s assets.
What Does Inter Vivos Mean?
The term “inter vivos” is Latin for “between the living.” In the context of trusts, it specifically refers to a trust arrangement made during the lifetime of the grantor, as opposed to being made as part of a will which only activates upon the grantor’s death.
What Are the Disadvantages of an Inter Vivos Trust?
Setting up an inter vivos trust comes with its set of challenges and disadvantages:
- Complexity and Cost: Establishing and maintaining an inter vivos trust can be complex and costly, requiring legal assistance to ensure proper setup and management.
- Loss of Control: In the case of an irrevocable inter vivos trust, the grantor forfeits control over the assets placed within the trust.
- Tax Implications: Depending on the structure, inter vivos trusts may have tax consequences for the grantor and the beneficiaries.
What is an Example of Inter Vivos?
A common example of an inter vivos trust is a parent setting up a trust to manage their property and financial assets for their children. The trust can specify how and when the children receive benefits, such as educational expenses or income support, while the parent can continue to manage the trust’s assets during their lifetime if it is revocable.
Moving Forward with Your Inter Vivos Trust
Inter vivos trusts offer a dynamic tool for estate planning, allowing for flexibility in asset management and beneficiary care during the grantor’s lifetime. However, the complexities involved make it essential to work with knowledgeable attorneys who specialize in trust law. PM Attorneys can guide you through the intricacies of setting up and managing an inter vivos trust, ensuring that your estate planning goals are met efficiently and effectively.
Contact PM Attorneys today to explore how an inter vivos trust can benefit your estate planning strategy.