Overview
A Living Trust, often referred to as an Inter Vivos Trust, is established and becomes operable during the settlor’s lifetime. Unlike a testamentary trust created through a will, a living trust enables the settlor to transfer assets to the trust, manage that trust while they’re alive, and ensure that those assets avoid the probate process upon their death.
The key feature of this trust is its ability to streamline estate management, minimize estate taxes, and provide confidentiality surpassing what a will can offer.
Examples
- Example 1: John places his home and investments into a living trust, designating his daughter as the trustee. Upon John’s death, his daughter will manage and distribute the assets according to John’s wishes without the probate court’s involvement.
- Example 2: Mary creates a living trust that allows her to dictate her care and financial allocations should she become incapacitated, ensuring her care needs are met without delays.
Frequently Asked Questions (FAQs)
Q1: What is the primary purpose of a living trust?
A1: The primary purpose of a living trust is to facilitate the management and distribution of the settlor’s assets during their lifetime and after their death, often bypassing the probate process.
Q2: How does a living trust differ from a will?
A2: A living trust is operational during the settlor’s lifetime and can manage assets if the settlor becomes incapacitated, whereas a will only takes effect after the settlor’s death and often requires probate.
Q3: Can I change or revoke a living trust?
A3: Yes, most living trusts are revocable, meaning you can alter or revoke them as long as you are alive and competent.
Q4: Do assets in a living trust avoid estate taxes?
A4: While assets in a living trust avoid probate, they are still subject to estate taxes; however, proper planning can minimize tax liabilities.
Q5: Who controls the assets in a living trust?
A5: The trustee, who can be the settlor themselves during their lifetime, manages and controls the assets.
Related Terms
- Testamentary Trust: A trust created through a last will and testament that only becomes effective upon the death of the settlor.
- Settlor: The person who creates and funds the trust.
- Trustee: The individual or institution responsible for managing the trust’s assets according to its terms.
- Probate: A judicial process for validating a will and administrating the deceased’s estate.
Online Resources
Suggested Books for Further Studies
- Plan Your Estate by Denis Clifford
- Living Trusts for Everyone: Why a Will Is Not the Way to Avoid Probate, Protect Heirs, and Settle Estates by Ronald Farrington Sharp
- The Complete Book of Wills, Estates & Trusts by Alexander A. Bove Jr. Esq.
Fundamentals of Living Trusts: Estate Planning Basics Quiz
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