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Inter Vivos Trust, also known as a living trust, is a legal arrangement that allows individuals to transfer their assets into a trust during their lifetime. Unlike a testamentary trust, which is created after an individual's death through their will, an inter vivos trust takes effect during the lifetime of the individual who creates it.

Essential Features of an Inter Vivos Trust

An inter vivos trust, also known as a living trust, is a type of trust created during the lifetime of the trustor (the person who creates the trust). It's a legal arrangement that allows assets to be held and managed by a trustee for the benefit of one or more beneficiaries.

The main features of an inter vivos trust include:

  • The trustor creates the trust and transfers assets into it during their lifetime.
  • The trustee manages the assets in the trust according to the terms of the trust document.
  • The trustor can name themselves as the trustee and retain control over the assets during their lifetime.
  • Upon the trustor's death, the assets in the trust pass to the beneficiaries named in the trust document.

Another important aspect of inter vivos trusts is the role of the trustee. The trustee is responsible for managing the trust assets and ensuring that they are distributed according to the trustor's wishes. Choosing the right trustee is crucial to the success of the trust.

When selecting a trustee, it's important to choose someone who is trustworthy, competent and has the necessary skills and experience to manage the trust assets. In some cases, the trustor may choose to name themselves as the trustee, which allows them to maintain control over the assets during their lifetime.

However, it's important to have a contingency plan in place in case the trustee is unable to fulfill their duties due to death, incapacity, or other circumstances. This can be accomplished by naming a successor trustee who will take over the management of the trust assets if the original trustee is unable to do so.

It's also important to consider the potential conflicts of interest that may arise when selecting a trustee. For example, if the trust assets include shares in a business, it may not be appropriate to name a family member or employee of the business as the trustee, as they may have conflicting loyalties.

Ultimately, the choice of trustee will depend on the individual circumstances of the trustor and their goals for the trust. Working with an experienced estate planning attorney can help ensure that the trustee selection process is carefully considered and that the trust is set up to meet the trustor's needs and objectives.

How an Inter Vivos Trust Works

An inter vivos trust can be a valuable tool for small business owners who want to protect their assets and plan for the future. Here's how it works: The small business owner creates an inter vivos trust and transfers assets into it. These assets can include:

  • Ownership interests in the business
  • Real estate
  • Investment accounts
  • Intellectual property
  • Personal property

The small business owners can name themselves as the trustee and retain control over their assets during their lifetime. This allows them to continue managing the business and its assets normally.

The small business owners name one or more beneficiaries to receive the assets in the trust upon their death. These beneficiaries can include family members, friends, or charitable organizations.

Upon the small business owner's death, the assets in the trust pass to the beneficiaries named in the trust document. Because the assets are held in the trust, they avoid the probate process and can be distributed to the beneficiaries quickly and privately.

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Advantages of Inter Vivos Trusts

Inter vivos trusts offer several advantages for small business owners, including:

  • Protection of Assets

    An inter vivos trust can help protect a small business owner's assets from creditors and lawsuits. Because the assets are held in the trust, they are not considered part of the business owner's personal assets and are protected from claims against them.

  • Flexibility

    An inter vivos trust can be customized to meet the specific needs of the small business owner. The trustee can name themselves as the trustee and retain control over the assets during their lifetime, or they can name someone else as the trustee and specify how the assets should be managed.

  • Privacy

    An inter vivos trust offers greater privacy than a will. Because the assets in the trust pass to the beneficiaries outside of probate, the details of the trust do not become public record.

  • Avoidance of Probate

    Probate refers to the legal process of distributing a person's assets after their death. It can be time-consuming and expensive, and it can tie up the assets of the estate for months or even years. An inter vivos trust can help avoid probate and ensure that the assets in the trust are distributed quickly and efficiently.

How to Set Up Inter Vivos Trust

If you're a small business owner interested in setting up an inter vivos trust, here are some tips to keep in mind:

  1. Choose a Trustee. The trustee is responsible for managing all assets and other belongings in the trust. Choose someone you trust to manage your assets and make decisions according to the terms of the trust document.
  2. Decide on the Terms of the Trust. The terms of the trust should be customized to meet your specific needs as a small business owner. Consider factors such as who will manage the assets, who will receive the assets upon your death, and how the assets should be distributed.
  3. Transfer Assets Into the Trust. To fund the trust, you will need to transfer assets into it. This may involve transferring ownership interests in your business, real estate, investment accounts, and other assets.
  4. Review and Update the Trust Regularly. It's important to review and update the terms of the trust regularly to ensure that it continues to meet your needs as a small business owner. Changes in your personal or business circumstances may require changes to the trust document.

Key Terms for Inter Vivos Trusts

  • Inter Vivos Trust: A trust created during the trustor's lifetime for the benefit of one or more beneficiaries.
  • Trustor: The person who creates the trust and transfers assets into it.
  • Trustee: The person responsible for managing the assets in the trust according to the terms of the trust document.
  • Probate: The legal process of distributing a person's assets after their death.
  • Estate Planning: The process of planning for the management and distribution of a person's assets upon their death.

Final Thoughts on Inter Vivos Trusts

In conclusion, an inter vivos trust can be a valuable tool for small business owners who want to protect their assets and plan for the future. By understanding the advantages of an inter vivos trust and following the tips for setting up a trust, you can ensure the smooth transition of your business and protect your assets for your loved ones.

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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


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