Different trusts serve different purposes.

You likely have heard about trusts as part of estate planning.

You know that one use of trusts is to bypass probate when it comes to transferring assets.

This sounds appealing to you.

Perhaps you will utilize a trust in your estate plan.

According to a recent Investopedia article titled “Inter Vivos Trust vs. Testamentary Trust: What's the Difference?,” you will need to select the proper trust for your needs.

Not all trusts are the same.

There are different types of trust?

Yes.

Trusts can be irrevocable or revocable.

They can also be inter vivos or testamentary.

What makes each unique?

Inter vivos trust are also known as living trusts.

These are created and funded while the maker of the trust is alive.

Money, investments, and real estate can all be transferred or titled to the trust.

These assets within the trust are used for the benefit of the person who created the trust (i,e., the "trustmaker") while he or she is alive.

How the trust functions depends on whether the trust is revocable or irrevocable.

The revocable trust allows for more flexibility for updating, changing, and controlling the trust and the assets held within the trust.

Both "funded" irrevocable and revocable trusts bypass probate proceedings when transferring the trust assets.

When the owner of the inter vivos trust dies, the trust becomes irrevocable and the successor trustee manages the trust for the next beneficiaries of the trust.

A testamentary trust is created under a last will and testament only when the maker of that last will dies.

The last will provides instructions for the creation and administration of the testamentary trust.

Because the testator is dead when the trust is created, it is irrevocable.

The last will must first be probated to establish its validity before the trust can be created.

The executor can then create and fund the trust according to the instructions provided in the last will.

Both the inheritance trust created under the inter vivos trust and the testamentary trust created under a last will can accomplish the same objectives.

The distinction? One avoids probate and the other requires probate.

What specific goals can these trusts accomplish?

They can protect property for children from a previous marriage.

Either trust can be used to give a lifetime income to a surviving spouse or to bypass a surviving spouse as an heir.

These trusts are helpful when beneficiaries are minors or have special needs.

You can also utilize them for charitable gifts.

If bypassing probate it important, a testamentary trust is not the best selection.

Discuss your goals with an experienced estate planning attorney to determine the best option to meet your needs.

Reference: Investopedia (Aug. 30, 2019) “Inter Vivos Trust vs. Testamentary Trust: What's the Difference?”