Testamentary and inter vivos trusts are two types of trusts that should be explored when estate planning.
Testamentary Trusts
A testamentary trust is created as part of the last will and testament. It does not take effect until the death of the testator, who is the person that created the will. Testamentary trusts are revocable, meaning it can be changed by the settlor if the settlor chooses to write a new will that revokes the old will that contained the testamentary trust. Once the settlor passes, the testamentary trust cannot be changed or revoked.
Inter Vivos Trusts
An inter vivos trust may be set up to be revocable or irrevocable. These types of trusts are set up during the settlor’s lifetime and become operative during the settlor’s lifetime. At the point in time that the trust terminates, the property in the trust is distributed per the terms of the trust.
Probate Considerations
Testamentary trusts are subject to probate, while inter vivos trusts are not. Probate is the legal process that administers an estate after the settlor passes. Typically, probate involves a representative collecting the assets, paying debts and taxes and distributing remaining property and assets to the beneficiaries.
