Inter-Vivos Trust (Living Trust)

What it is

An inter-vivos trust—commonly called a living trust—is a legal arrangement that holds and manages assets while the person who created it (the trustor or settlor) is alive. A trustee manages the trust assets for the benefit of named beneficiaries. The trustor can serve as trustee during their lifetime and name a successor trustee to take over if they become unable to manage their affairs.

How it works

• Parties: trustor (settlor), trustee, and beneficiary(ies). Contingent trustees and beneficiaries can be named.
• Funding: the trust is funded by retitling assets into the trust’s name (real estate, investments, business interests, etc.). Some assets—like certain retirement accounts and life insurance—often pass directly to designated beneficiaries and may not need to be retitled.
• Management and distribution: the trustee manages assets according to the trust terms and distributes them to beneficiaries at the times and in the manner specified.
• Lifecycle: most living trusts are revocable while the trustor is alive and typically become irrevocable on the trustor’s death.

Types of living trusts

• Revocable trust — The trustor retains the power to modify or revoke the trust during their lifetime. Income earned by the trust is usually treated as the trustor’s income for tax purposes. Revocable trusts provide flexibility and can simplify post-death asset distribution.
• Irrevocable trust — Once established, the trust cannot be changed or revoked. Assets transferred into an irrevocable trust are removed from the trustor’s estate for many purposes, which can reduce estate tax exposure and protect assets from certain creditors.

Key benefits

• Probate avoidance: assets held in the trust generally bypass probate, allowing faster, private transfer to beneficiaries and reducing court involvement and public disclosure.
• Continuity: a successor trustee can step in immediately if the trustor becomes incapacitated, providing uninterrupted asset management.
• Privacy: trust terms and asset distributions remain private, unlike probate proceedings, which are public.
• Estate and tax planning: irrevocable trusts can reduce the taxable estate; revocable trusts preserve control but do not shield assets from estate taxes if the estate exceeds applicable exemptions.

Establishing a living trust

• Name the trust parties: trustor(s), trustee(s), successor/contingent trustees, and beneficiaries.
• Choose which assets to fund into the trust and retitle them appropriately.
• Draft clear instructions for management and distribution, including timing and conditions.
• Use a will in conjunction with the trust: a pour-over will can transfer any assets not funded into the trust and can establish guardianship for minor children (a trust alone does not establish guardianship).

Common questions

What does inter-vivos mean?
* Latin for “between the living” or “while alive.”

Can an inter-vivos trust be revocable?
* Yes—living trusts can be either revocable (most common) or irrevocable.

What is a testamentary trust?
* A testamentary trust is created by a will and takes effect only after the trustor’s death—unlike an inter-vivos trust, which operates during the trustor’s life.

What is a settlor?
* A settlor (also called a trustor or grantor) is the person who creates and funds a trust.

Bottom line

A living (inter-vivos) trust is a flexible estate-planning tool that holds and manages assets during the trustor’s lifetime and facilitates private, efficient distribution to beneficiaries after death. Decide between revocable and irrevocable forms based on control, tax goals, and asset-protection needs, and coordinate the trust with a will to address any assets not funded into the trust and guardianship matters. Consider consulting an estate-planning attorney to ensure the trust is properly drafted and funded.