Testamentary vs. Inter Vivos Trusts

Video

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.