An inter vivos trust, also known as a “living trust”, is a type of trust that is often used in estate planning and management. As indicated by its name, one of the main features of an inter vivos trust is that its contents can be distributed to the entitled beneficiaries while the settlor (i.e., the creator of the trust) is still alive.
This “life” feature is in direct contrast to the characteristics of other kinds of common estate planning tools, which are usually only enforceable upon an estate holder’s death (e.g., a will document).
The way in which an inter vivos trust operates is that the property owner will first appoint a trustee. A trustee is the individual who is chosen to oversee the property or assets being held “in trust.”
Once the trustee has taken over this duty, the property will then be distributed to the assigned beneficiaries (or recipients) of the trust. Thus, the consequence of this arrangement means that the property does not directly pass from the property owner to the beneficiary, but instead is supervised for a certain amount of time by the trustee.
In addition, there may be many different reasons for selecting this type of trust set-up. For instance, an inter vivos trust may be created if the beneficiaries are too young to be responsible for the trust property, or possibly when there are conditions attached to how the trust property or funds get released to the beneficiaries.
What are Some Features and Limitations of an Inter Vivos Trust?
In general, inter vivos trusts are typically subject to the standard legal rules and requirements for creating a trust. For example, there must be a settlor, a trust property (i.e., the “res”), a designated trustee, and at least one beneficiary in order to form a basic trust.
As mentioned, one of the key features of an inter vivos trust is that its property can be distributed while the settlor is still alive. Some other positive features of an inter vivos trust may include that:
- They are relatively easy to set-up;
- Its arrangement enables the parties to skip the probate process;
- The beneficiary might be able to use the trust property sooner than they could as the recipient of a gift or inheritance from a will; and
- They can potentially reduce the property holder’s estate taxes since the trust property will no longer be included as part of their estate.
On the other hand, inter vivos trusts also have some limitations associated with them. Some of these restrictions may include that:
- Any property distributions generally cannot be changed (e.g., it is usually not possible or advisable to attempt to reclaim the property after it has already been distributed);
- The trust may be amended in between the time of the trust creation and the testator’s passing, which could affect what a beneficiary receives; and
- The laws governing inter vivos trusts will vary in accordance with the rules of the jurisdiction in which the transaction occurs.
Thus, it is certainly in a person’s best interest to carefully review the pros and cons of inter vivos trusts before making a decision about whether to form one. This will usually entail obtaining the advice of an estate lawyer who can help them determine if an inter vivos trust is the optimal estate planning solution for their particular situation.
What If There is a Dispute About an Inter Vivos Trust?
There are a variety of events that could happen that may lead to a dispute over an inter vivos trust. One common type of dispute that might occur with this kind of trust is when a beneficiary contests against the terms of the trust.
Another frequently disputed issue is when the property owner did not clearly describe the property in question, which can lead to major confusion during the distribution process. A dispute may also arise when the trustee has potentially violated their legal responsibilities and duties required of all trustees.
As demonstrated by the above scenarios, any of the parties to an inter vivos trust will have some form of legal obligations that they must fulfill or it will be considered a violation that carries legal consequences.
For example, a dispute regarding the terms of the trust may lead to a civil lawsuit, which can result in a damages award to the non-violating party. In fact, most disputes that involve inter vivos trusts are typically resolved in a civil court of law. Additionally, they are handled in a similar way to contract disputes, and usually involve other fields of property law, such as wills or estates.
Do I Need to Hire a Lawyer for Help with Creating an Inter Vivos Trust?
Depending on the needs of the parties involved, an inter vivos trust can be an extremely useful estate planning instrument. If you believe that creating an inter vivos trust would best suit your needs or if you have further questions about setting one up, you should consider contacting a local estate lawyer for assistance.
An experienced estate lawyer can help you draft, edit, and review the necessary legal documents that are required to form a valid trust. In addition, a lawyer can also provide legal guidance if you are dealing with issues that involve a trust dispute or lawsuit.