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Inter vivos versus testamentary trusts: Which to choose?

Estate planning can be complex or simple, depending upon the individuals and assets involved. One option for preserving assets is an inter-vivos trust.

Inter vivos trusts are often called living trusts. The fiduciary relationship with the trustor begins when the trust is created. Assets can be distributed to the beneficiaries while the trustor is alive or after he or she is deceased.

Inter vivos trusts are the entities that hold ownership of a trustor's assets while that person is alive. By having an inter vivos trust in place, assets can be transferred more smoothly to the heirs. Probate, and its costly encumbrances and fees, can be efficiently sidestepped.

Trustors like having the level of control over managing the assets of inter vivos trust. While they are able, they may oversee assets as trustees and revoke provisions — or the entire trust — during their lifetimes, at the end of which the terms of the trusts revert to irrevocable.

Testamentary trusts differ in that the fiduciary and legal relationship begins with the implementation of the instructions in the decedent's will.

Parents of minor children can establish testamentary trusts for their assets where the children have no access to any assets until they have reached the age of majority, or beyond. The trustor can specify a certain age or milestone be met by the beneficiaries, e.g., age 25, graduation from college, upon marriage, etc., before the assets are transferred to them.

There is no one-size-fits-all option for estate planning, as each individual, couple and family have unique needs that must be carefully considered. Inter vivos and testamentary trusts are just two examples of asset management for Massachusetts residents to consider.

Source: Investopedia, "Inter-Vivos Trust," accessed Dec. 23, 2016

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