Inter Vivos Trust - Explained
What is an Inter Vivos Trust?
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Back to: INHERITANCE, ESTATES, & TRUSTS
What is an Inter-Vivos Trust?
An inter-vivos trust is a type of trust used in estate planning that highlights the distribution of properties according to the terms of the trust. An inter-vivos trust is created during the lifetime of the trustor, in this trust, a fiduciary relationship exists between trustor, trustee and beneficiary. An inter-vivos trust is otherwise called a living trust, it contains the distribution of the assets of a trustor to beneficiaries during or after the lifetime of the trustor. In this trust, the settlor (trustor) transfers (distributes) his assets to beneficiaries through a second party.
How Does an Inter-Vivos Trust Work?
A testamentary trust is the opposite of an inter-vivos trust. The major difference between these two types of trust is that a testamentary trust is created by a will and takes effect after the death of the trustor, while an inter-vivos trust is a living trust that can go into effect during the life of the trustor or after his death. An adequately established inter-vivos trust is an important process in distributing the assets of a trustor during his lifetime or after death, this trust also helps to avoid probate. The trust contains which assets will be distributed to which beneficiary. Here are some important points to know about an inter-vivos trust;
- An inter-vivos trust is a document used in estate planning to distribute the assets of a trustor to beneficiaries.
- It is a living trust that holds the asset of a trustor until the time stipulated for distribution.
- In an inter-vivos trust, the trustor (settlor) can be the trustee until another trustee emerges during their lifetime.
- A properly planned inter-vivos trust helps to avoid probate in which the distribution of the trustors assets is done in the court.
- The opposite of an inter-vivos trust is a testamentary trust which takes effect after the demise of the trustor.
How is an Inter-Vivos Trust Used?
An inter-vivos trust helps a trustor adequately plan the distribution of his wealth and assets during or after his lifetime. Otherwise called a living trust, an inter-vivos trust must be created while the trustor is alive. This trust aids an easy transfer and distribution of a trustors assets. A living trust, when properly done removes the need for a probable which is cost-intensive and time-consuming. In an inter-vivos trust, the trustor can also be a trustee, which means they can manage the assets until they find a befitting beneficiary or recipient. This type of trust can be revoked by the trustor, especially when the trustor wants to change the recipients of their assets, however, once the trustor passes on, an inter-vivos trust becomes irrevocable.
Setting up a Trust
There are certain procedures involved in setting up an inter-vivos trust, they are;
- The parties to the trust must be named by the grantor or trustor. These parties include the trustee and the beneficiaries of the trust.
- The assets held in the trust must also be clearly specified by the trustor. Any type of assets can be held in this trust, examples include; real estate properties, investments, business proceeds and others.
- The asset in the trust must be assigned to specific beneficiaries.
- The mode and timing of assets distribution must be included in the trust.
- Declaration of Trust
- Uniform Gifts for Minors Act
- Acceptance of Office by Trustee
- Beneficial Interest
- Asset Protection Trust
- Bare Trust
- Blind Trust
- Charitable Lead Trust
- Charitable Remainder Trust
- Charitable Remainder Annuity Trust
- Charitable Gift Annuity
- Credit Shelter Trust
- Discretionary Trust
- Generation Skipping Trust
- Grantor Trust Rules
- Living Trust
- Inter Vivos Trust
- Revocable Trust
- Irrevocable Trust
- Irrevocable Income-Only Trust
- Qualified Domestic Trust (QDOT)
- Qualified Terminal Interest Protection Trust (QTIP)