What is a ‘Living Trust’
A living trust is a property interest created during a person’s life that allows easy transfer of assets without going through the process of probate. A living trust is an agreement where the trustee holds the legal possession of a fund or assets that belong to another person, the beneficiary, and it is created while the person is alive. This is different compared to other types of trusts that are created through the person’s will. Also known as inter-vivos trust.
There are two types of trusts: inter-vivos (living) trusts and testamentary trusts. Testamentary trusts are trusts that are established through a last will and testament, whereas living trusts are created while the person is alive. The advantage of establishing a living trust is that assets do not have to go through probate, which can be costly and take a lot of time.
A testamentary trust is a legal and fiduciary relationship created through explicit instructions in a deceased’s will. A testamentary trust goes into effect upon an individual’s death and is commonly used when someone wants to leave assets to a beneficiary, but doesn’t want the beneficiary to receive those assets until a specified time. A testamentary trust is irrevocable after the death of the testator. Also called a Will Trust.
An inter vivos trust is a fiduciary relationship used in estate planning created during the lifetime of the trustor. Also known as a living trust, this trust has a duration that is determined at the trust’s creation and can entail the distribution of assets to the beneficiary during or after the trustor’s lifetime. The opposite of an inter vivos trust is a testamentary trust, which goes into effect upon the death of the trustor.