The Inter Vivos Trust What is a Inter Vivos Trust?   A Inter Vivos trust is a written declaration and contract in which you state that you (as "settlor") are transferring your property into an Inter Vivos trust for the benefit of yourself during your lifetime (lifetime "beneficiary") and then for the benefit of your heirs (remainder "beneficiaries"). You will be the "trustee" of your Inter Vivos trust which means that during your lifetime, you will have complete control over the Inter Vivos trust's assets. The "successor trustee" you name will take control over your Inter Vivos trust in case of your death or incapacity. In addition, you will have the power to change, amend, or revoke your Inter Vivos trust at any time during your lifetime.

Avoidance of Probate   The main advantage of an Inter Vivos trust is the avoidance of probate. Probate is a state court proceeding in which your property is transferred to your heirs. All Wills must be probated; not so with an Inter Vivos trust. Since probate only affects assets you own at the time of your death, assets placed in an Inter Vivos trust are not owned by you, therefore, there is no probate on those assets. Probate will generally cost about 3-4% of the value of the probate assets and will take from 9 months to 2 years (absent litigation or contested claims) to complete. You save probate fees by using a properly funded Inter Vivos trust.

Confidentiality and Continuity of Ownership   Confidentiality and Continuity of Ownership: Since probate is a court proceeding, your Will and the valuation of your assets are open to public inspection. An Inter Vivos trust, however, is confidential and the transfer of assets from the Inter Vivos trust is kept from public view. When the settlor of an Inter Vivos trust dies or becomes incapacitated, the successor trustee continues the administration of the Inter Vivos trust. With an Inter Vivos trust, there is no "gap" period between the time of death and the appointment of the executor which occurs under a Will. Also, the continuity of the Inter Vivos trust is preserved if the settlor becomes incapacitated through illness or accident through the successor trustee. In this case, the Inter Vivos trust would be administered for the benefit of the grantor.

Conclusion   Initially a trust has greater costs with respect to its formation and implementation than a will, but those costs are usually a small percentage of the amount saved through the avoidance of probate costs at the time the grantor dies. Additionally, if confidentiality and continuity of ownership are important objectives, then the trust is the document of choice. Conversely, if confidentiality and continuity are not important objectives, and if the initial cost and administration of a trust outweigh the potential savings through the avoidance of probate, then a will should be used.

Additional Resources   For additional information on Trusts and Estate Planning in general, please see the Tax Prophet's section  Estate Planning.

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