Testamentary versus Inter Vivos Trusts

A trust is an arrangement where property is transferred with the intent that it be held and administered by the person to whom the benefit is for.  There is a large assortment of trust types, however, the two main types of trusts are (1) the inter vivos trust and (2) the testamentary trust.  The inter vivos trust, often referred to as a living trust, refers to a trust transfer made during one’s lifetime.  The testamentary trust, on the other hand, only arises upon one’s death—typically specified in one’s will.

An inter vivos trust is created by a settlor and signed by the settlor and any named trustees.  It is created and funded during one’s life time and may be revocable or irrevocable.  A testamentary trust is usually created in the will of a settlor and must be probated.  Testamentary trusts are irrevocable as they are created after one’s death and, therefore, cannot be amended or revoked.  Inter vivos trusts generally do not have to go through probate and are created primarily to provide an economic benefit to specific people or institutions.  Payments to the beneficiaries can begin immediately during one’s lifetime or upon death as specified.

Whether an inter vivos trust or a testamentary trust is the better plan depends on the settlors’ objectives.  Inter vivos trusts are an effective way to reduce the value of an estate and the subsequent effect of federal and state estate taxes.  Testamentary trusts can provide for the care of beneficiaries without the need for a public trustee/guardian upon death.

If you are interested in discussing your estate, creating a trust, or creating a comprehensive estate plan, contact  the San Jose estate planning attorneys at Lonich Patton Erlich Policastri, LLP.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.