Voluntary Trust

What it is

A voluntary trust (also called an inter vivos or living trust) is a trust created by a person (the settlor or trustor) during their lifetime. It is a legal arrangement in which the settlor transfers assets (the res) to a trustee to hold and manage for the benefit of one or more beneficiaries. In a voluntary trust the beneficiary receives the gift without providing consideration—unlike a trust for value, which arises from a purchase or loan.

Voluntary trusts are commonly used in estate planning and can be structured as revocable (changeable by the settlor) or irrevocable (generally permanent).

How it works

• Settlor/trustor: creates the trust and transfers assets into it.
• Trustee: holds legal title to the trust assets and manages them according to the trust terms.
• Beneficiary: receives benefits from the trust according to its terms (income, principal, or both).
• Res: the property or assets placed in the trust.

Key distinctions:
– Living (inter vivos) trusts are established while the settlor is alive. Testamentary trusts are created by a will and take effect after death.
– Revocable trusts can be amended or revoked by the settlor during their lifetime. Irrevocable trusts generally cannot be changed and often provide stronger asset protection and tax advantages.

Example

Organizations sometimes operate voluntary trust funds to support projects and operations. For example, an international alliance established a voluntary trust fund to support its program activities, outreach initiatives, and core operational needs through voluntary contributions administered by the trust.

Trust basics: probate, privacy, and taxes

• Probate: the court-supervised process that validates a will and distributes assets. Probate procedures and costs vary by jurisdiction.
• Trust vs. will: assets held in a properly funded trust generally bypass probate, which can speed distribution and maintain privacy because probate proceedings are public.
• Taxes: a revocable trust typically does not avoid estate taxes while an irrevocable trust may offer estate and gift tax advantages depending on structure and applicable law.

Advantages of a voluntary (living) trust

• Avoids probate for assets transferred into the trust, often speeding distribution.
• Greater privacy for beneficiaries compared with the public probate process.
• Flexibility (if revocable): the settlor can retain control and amend the trust as circumstances change.
• Can provide continuity in asset management if the settlor becomes incapacitated.

Disadvantages and considerations

• Higher upfront cost and complexity compared with a simple will.
• Requires active funding: assets must be retitled or transferred into the trust.
• Ongoing administration can be more involved, especially for irrevocable trusts.
• Irrevocable trusts limit flexibility once established.

When to consider a voluntary trust

• You want to avoid probate and keep estate matters private.
• You need a mechanism to manage assets if you become incapacitated.
• You want to set specific conditions for when and how beneficiaries receive assets.
• You are seeking certain tax or asset-protection strategies that an irrevocable trust can provide (after consulting legal and tax advisors).

Bottom line

A voluntary trust is a living trust created during the settlor’s lifetime to hold and manage assets for beneficiaries. It’s a common estate-planning tool that can avoid probate and provide privacy and continuity, but it requires careful setup, ongoing administration, and consideration of whether a revocable or irrevocable structure best meets your goals. Consult an attorney or tax advisor to determine the right trust structure for your situation.