Inter-Vivos Trust

Introduction

When it comes to estate planning, there are various tools and strategies available to individuals to ensure their assets are protected and distributed according to their wishes. One such tool is an inter-vivos trust, also known as a living trust. This type of trust has gained popularity in recent years due to its flexibility and ability to avoid probate. In this article, we will explore what an inter-vivos trust is, how it works, and the benefits it offers to individuals and their families.

What is an Inter-Vivos Trust?

An inter-vivos trust is a legal arrangement in which an individual, known as the grantor, transfers their assets into a trust during their lifetime. The grantor appoints a trustee to manage the trust and distribute the assets to the beneficiaries according to the terms outlined in the trust document. Unlike a testamentary trust, which is created through a will and takes effect upon the grantor's death, an inter-vivos trust is established while the grantor is still alive.

How Does an Inter-Vivos Trust Work?

The process of creating an inter-vivos trust involves several key steps:

• 1. Establishing the Trust: The grantor works with an attorney to draft a trust document that outlines the terms and conditions of the trust. This document specifies the assets to be transferred into the trust, the beneficiaries, and any specific instructions for the trustee.
• 2. Funding the Trust: Once the trust document is finalized, the grantor transfers ownership of their assets, such as real estate, investments, and bank accounts, into the trust. This process is known as funding the trust.
• 3. Appointing a Trustee: The grantor appoints a trustee to manage the trust and carry out its instructions. The trustee can be an individual, such as a family member or close friend, or a professional trustee, such as a bank or trust company.
• 4. Administering the Trust: The trustee is responsible for managing the assets held in the trust, investing them prudently, and distributing them to the beneficiaries according to the terms of the trust. The trustee must act in the best interests of the beneficiaries and follow the grantor's instructions.

Benefits of an Inter-Vivos Trust

Inter-vivos trusts offer several advantages over other estate planning tools. Here are some key benefits:

• Avoidance of Probate: One of the primary advantages of an inter-vivos trust is that it allows assets to pass to beneficiaries without going through the probate process. Probate can be time-consuming, expensive, and subject to public scrutiny. By avoiding probate, the assets held in the trust can be distributed more quickly and privately.
• Flexibility: Inter-vivos trusts offer greater flexibility compared to other estate planning tools. The grantor can modify or revoke the trust during their lifetime if their circumstances or wishes change. This flexibility allows for greater control over the distribution of assets.
• Asset Protection: Assets held in an inter-vivos trust are protected from creditors and potential lawsuits. This can be particularly beneficial for individuals in professions with a higher risk of liability, such as doctors or business owners.
• Privacy: Unlike a will, which becomes a public record upon probate, an inter-vivos trust provides greater privacy. The terms of the trust and the distribution of assets remain confidential, protecting the grantor's privacy and the beneficiaries' financial information.

Case Study: The Smith Family

To illustrate the benefits of an inter-vivos trust, let's consider the case of the Smith family. Mr. and Mrs. Smith, a married couple with two children, want to ensure their assets are protected and distributed according to their wishes. They decide to create an inter-vivos trust and transfer their home, investments, and bank accounts into the trust.

Unfortunately, Mr. Smith passes away unexpectedly. As the assets were held in the inter-vivos trust, they bypass the probate process, allowing Mrs. Smith to access and manage them immediately. The trust document specifies that upon Mr. Smith's death, the assets are to be distributed equally to their two children.

By utilizing an inter-vivos trust, the Smith family avoids the time and expense of probate. The assets are distributed according to their wishes, and the family's privacy is maintained throughout the process.

Conclusion

An inter-vivos trust is a powerful estate planning tool that offers individuals and families numerous benefits. By establishing a trust during their lifetime, individuals can ensure their assets are protected, avoid probate, and maintain privacy. The flexibility of an inter-vivos trust allows for modifications and adjustments as circumstances change. Whether it's protecting assets from creditors or ensuring a smooth transfer of wealth to future generations, an inter-vivos trust can be a valuable addition to any comprehensive estate plan.