A trust you can set up during your life. Living trusts are an excellent way to avoid the cost and hassle of probate because the property you transfer into the trust during your life passes directly to the trust beneficiaries after you die, without court involvement. The successor trustee–the person you appoint to handle the trust after your death–simply transfers ownership to the beneficiaries you named in the trust. Living trusts are also called “inter vivos trusts.”
n. sometimes called an inter vivos (Latin for “within one’s life”) trust, a trust created by a declaration of trust executed by the trustor or trustors (also called settlor or settlors) during his/her/their lifetime, as distinguished from a “testamentary trust,” which is created by a will and only comes into force upon the death of the person who wrote the will. A living trust should not be confused with a “living will,” which provides for medical care decisions when a person is terminally ill. While a living trust is a generic name for any trust which comes into existence during the lifetime of the person or persons creating the trust, most commonly it is a trust in which the trustor(s) or settlor(s) receive benefit(s) from the profits of the trust during their lifetimes, followed by a distribution upon the death of the last trustor (settlor) to die, or the trust continues on for the benefit of others (such as the next generation) with profits distributed to them. There are other types of living trusts including irrevocable trust, insurance trust, charitable remainder trust and some specialized trusts to manage some parts of the assets of a person or persons.
A living trust (also called a grantor trust, revocable trust, or an inter vivos trust) is an agreement in which the person who established the trust, known as the grantor, transfers the estate to a designated trustee for subsequent management.
A living trust is a revocable arrangement, whereby all rights to income and principal can be legally terminated or amended while the grantor is either alive or competent. The inception of a living trust occurs during the grantor’s lifetime. After his or her death, however, the living trust becomes irrevocable. A living trust is not a way to merely transfer assets. Living trust arrangements are initiated primarily in order to facilitate the thorough and systematic management of an estate. Thus, the successor of a living trust is typically a carefully chosen trustee. A living trust is also an effective means to forego the probate process that is sometimes associated with a will and can help in situations of incompetence. Additionally, a living trust is an estate planning instrument that may help reduce estate taxes, (especially for married couples).
Although both a will and a living trust can be modified or revoked at any time before death, such changes are slightly more time-consuming for a living trust. Additionally, assets that a person wants to move to a living trust, such as real estate and bank or brokerage accounts, have to be retitled.
While the grantor is still alive, a living trust appoints a trustee to manage the beneficiary’s assets.
Fiduciary trustees handle trusts in the beneficiary’s best interests.
Living trusts are available in two varieties: irrevocable and revocable.
A trust created for the trustor and administered by another party while the trustor is still alive. A living trust can be either revocable or irrevocable. A living trust avoids probate and therefore gets assets distributed significantly more quickly than a will does. It also offers a higher level of confidentiality, as probate proceedings are a matter of public record. Additionally, trusts are usually harder to contest than wills. On the downside, a living trust takes longer to put together than a will, and requires more ongoing maintenance. Although both a will and a living trust can be modified or revoked at any time before death, such changes are slightly more time-consuming for a living trust. Additionally, assets that a person wants to move to a living trust, such as real estate and bank or brokerage accounts, have to be retitled.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 29th March 2024.
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