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What is an inter vivos trust?

Florida is home to thousands of retirees and if you are one of them, you may have heard your friends and neighbors talking about the financial advantages of the inter vivos trusts they established. If you have long since forgotten your high school Latin, "inter vivos" is a Latin phrase literally meaning "between the living." An inter vivos trust, therefore, is one you set up during your lifetime that takes effect the moment you sign it.

As the American Bar Association explains, you can set up a variety of inter vivos trusts including the following types:

  • Revocable trust: one that you can change or alter later
  • Irrevocable trust: one that you cannot change or alter later
  • Special needs trust: one you set up to benefit your disabled child, grandchild, etc.
  • Charitable trust: one you set up to benefit your favorite charity
  • Spendthrift trust: one you set up to benefit someone, but not allow him or her to sell or pledge its assets until (s)he reaches the age you specify
  • Pet trust: one you set up to provide care for your pet(s) after you die.

Whatever kinds of inter vivos trust yous choose to establish, they all have the following three things in common:

  1. A testator a/k/a settlor - you or you and your spouse if you set up the trust jointly
  2. A trustee - the person, bank, etc. you designate to manage the trust assets and distribute its income
  3. A beneficiary - the person (including yourself), charity, group, organization, etc. you designate to receive the trust income and ultimately its remaining assets

Funding your trust

Bear in mind that your inter vivos trust is merely a device for distributing the assets and/or income therefrom that your trust contains. Without sufficient assets, your trust has inadequate funds to distribute to your trust beneficiaries in the amounts and at the times you wish.

Consequently, you must put sufficient assets, preferably income-generating assets, into your trust to ensure that it has and will continue to have the necessary money. Most people put such things as stocks, bonds, rental properties, retirement accounts, life insurance policies, etc. into their trust(s).

Naturally the trustee you designate must be sufficiently knowledgeable and sophisticated to advantageously manage these assets so they and their income will grow over time. Depending on the size of your trust, the length of time you want it to remain in effect, and the type of assets it contains, you may wish to designate a stock brokerage, insurance professional, real estate brokerage, bank, or some other appropriate financial-related institution as your trustee.

This is educational information only and not intended to provide legal advice.

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