Stautz Law

Tag: Terminology

  • Testamentary vs. Inter Vivos Trusts

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    Hi folks, it’s Andy Stautz at Stautz Law. Today we’re talking about another estate planning topic and that is the difference between testamentary trusts and inter vivos trusts. I’m kind of interested in testamentary trusts because I I think they’re underused. So let’s let’s talk about the difference.  

    This is the terminology, and then in a future video, we’ll talk about how to use them.  

    Why is it called a Testamentary Trust?

    The basic difference is a testamentary trust is established in your will. Your last will and testament. So “testamentary,” it’s in the testament. These trusts don’t exist until you die. Until the will makes them exist.  

    Why is it called an Inter Vivos Trust?

    Contrast that with an inter vivos trust: inter vivos, you’ll see it written here. INTER. That’s Latin word meaning “between.” Vivos: V-I-V-O-S vivos are living people. Also Latin. I can’t think of any words off the top of my head, but “revival,” right? That “V-i-v,” that means alive.  

    So inter vivos trusts are ones you make between people who are alive. And the most common… probably the most common inter vivos trust is a revocable living trust. That’s the basic probate avoidance trust that you see all the time.  

    What Kind of Trust is a Revocable Trust?

    And you might say, wait a minute. I thought my revocable trust only works after I die. It’s like a will substitute. And the answer is, yeah, you’re right. . . most of the action happens…in a revocable living trust, most of the action happens after death. That’s when you know the trust winds up. The successor trustee has to distribute the assets, you know. 

    But you made it while you were alive. You passed the trust assets while you were alive. So that’s what makes itan inter vivos trust.  

    Now returning to testamentary trusts. Like I said, they’re created in a last will and testament, so you need to have that document, obviously. But otherwise there aren’t really any restraints.  

    Uses and Limits on Testamentary Trusts

    You know, if your will doesn’t have a trust, it might be two, three, four pages. You can put a a great big honking trust in your will. You know, as complicated as you want it to be.  

    I think the most common use is a minor’s trust. So we’ll talk about planning scenarios in the next in the next situation. But you know it could be you’re in a place where it doesn’t make sense to retitle all your assets into a trust and worry about administering a trust. You know, as an emergency backup, maybe you’ve got a testamentary trust so that you don’t accidentally drop a huge inheritance on minor children. Because you know that causes problems both while they’re minors and when they come into the money all of a sudden on reaching majority.  

    So that’s kind of the difference: testamentary, created in your last will and testament; inter vivos, between living people. And we’ll talk more about uses later. 

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  • Talking About . . . Trust Terminology

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    Hi, welcome back. It’s Andy Stautz at Stautz Law and we’re here for another quick informational chat, this time about trust terminology, aka the lingo.

    Oftentimes, clients are intimidated by all the the new terms, the new words they run into when they’re talking to their estate planner, or starting to read about estate planning and and think about their options. So especially in the in the trust world, which is just a part, but an important part of of what I do for my clients, it’s worth knowing some of the terms so you can think about how how you want your plan to work and you can go into your planning meeting confident that you know what’s going on.

    So just going back to basics, umm, a trust is a legal relationship. . . . between three people. There is a settlor, or a grantor, (2 names for the same thing), and that’s the person Who gives the property. And then there is the trustee. The trustee is the person who holds the property. And then there is the beneficiary. The beneficiary is the person who enjoys the property.

    [T]he clever idea of a trust is to separate the ownership, which is in the trustee’s hands, and the use and enjoyment, which is in the beneficiaries’ hands. So your basic three players are the settlor or the grantor, sometimes you know, it’s even called a trustor, but that’s very rare. The trustee just called a trustee. No alternate terms there. And then the beneficiary.

    And umm, the confusing part sometimes. Is that a grantor can also be a trustee? And also a beneficiary. Kind of in some circumstances.

    And so that leads us to our next topic, which is OK. About all the different names for trusts. You know — what’s the difference between a revocable and an irrevocable trust? A grantor or non grantor trust? What about an asset protection trust?

    And the thing there to understand is those are just descriptive titles. Those are just different ways of explaining the type of trust you’re talking about. Because the basic concept of separating legal and equitable ownership. Can be used in so many different ways. So if you’re saying a trust is. Revocable or irrevocable, that just means that the grantor can decide to take it. And unwind it, versus irrevocable. Irrevocable can’t be. . . The trust can’t be undone once it’s been made.

    Same thing with. You know, a grantor trust for tax purposes is one where the grantor retains, you know, is still the beneficiary in some way. Umm. Versus a non grantor trust.

    Same thing with a self settled trust. As you might imagine, the self settled means the settlor, the grantor. has put the property in trust for himself or herself, so self settled.

    And so for many of these concepts, you . . . They can be. . . They’re just descriptive terms and and sometimes. You know, it’s kind of insider knowledge, OK? A Medicaid asset protection trust. Do we call it a MAPT or . . . . ? You get to sophisticated, you know, SLATs and GRATs, and you know all these increasingly esoteric acronyms.

    They’re all just different ways to describe the type of trust that’s being used. Just a convenient technical short hand.

    But the basic terms to remember settlor or grantor, trustee, beneficiary. And that basic relationship works for all trusts, no matter how complicated, because that’s what makes the trust the trust.

    Hope you’ve enjoyed this overview. If you’re ready to talk trusts with me, I would love it. You can book an initial planning meeting online. You can give me a call. And I look forward to working with you with personalized advice for for your situation and come up with the best plan that’s that’s going to work for you. Until then, bye now!

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    Book your initial planning meeting with Stautz Law and we’ll discuss your individual needs. No obligation.

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