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
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.
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.
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.
For additional information on Trusts and Estate Planning in
general, please see the Tax Prophet's section Estate Planning.
All contents copyright ? 2008 Robert L. Sommers, attorney-at-law. All rights reserved. This internet site provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and changes in the law, must be considered when applying U.S. tax law. You should always consult with a competent tax professional licensed in your state with respect to your particular situation. The Tax Prophet(TM) is a trademark of Robert L. Sommers.