Do you know the difference between a testamentary and a living trust (inter vivos trust), and how those tools can be used to benefit your estate plan? When it comes to creating and managing wills and trusts in Massachusetts, finding the right structure for your personal assets is absolutely critical. Today, we explore the difference between these two important instruments, allowing you to start making the right decision for your financial future.
The difference between testamentary and living trusts is fairly simple: Testamentary trusts are used in your will and are administered after your death, while living trusts are established by a living person. Although that definition is fairly easy to understand, there are some more subtle elements to both of these tools that can complicate matters for those who are not fully informed. For instance, your living trust could also turn into a testamentary trust after your death. You may need additional information about revocable and irrevocable trusts in order to understand more about testamentary and living trusts.
A testamentary trust or living trust can be either revocable or irrevocable. In a revocable trust, the “grantor,” or creator of the trust, can make changes to its holdings at any time. Irrevocable trusts are the opposite – grantors release all control over the trust, which is funded with assets such as property or cash. In the case of a living trust that becomes a testamentary trust, the trust goes from being revocable to being irrevocable because the grantor is no longer alive to make changes.
Creating a trust to protect your beneficiaries’ future can be a useful exercise that allows for additional estate protection. These tools all allow your holdings to be properly distributed according to your wishes. A qualified estate attorney can help you establish a plan that suits your specific needs and preferences.
Source: The Balance, “Testamentary vs. Living Trusts,” Julie Garber, accessed March 10, 2017