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Trusts Series Part III: Trust Forms

As stated in Part II of this series, trusts can be made by either oral or written means. Although oral trusts can be just as valid as written trusts they are often harder to prove as valid because there is no documentation to verify them. This section will focus primarily on the two main forms of written trusts, inter vivos and testamentary trusts.

 

Inter vivos trusts are any trusts created by a donor while he or she is alive. This is the most common form of trust.

 

Testamentary trusts are trusts that are created by a will. There may be instances where a testator wants to make a devise to someone, but he feels that that person may not be able to properly manage the assets. That person may be a minor, be mentally incapable, or may simply be bad with money. Testamentary trusts allow testators to make conditional and time delayed devises with more power and control than traditional will provisions.

 

The main disadvantage in the creation of testamentary trusts is the loss of the ability to avoid probate. Inter vivos trusts create a new legal entity to hold assets and property while the donor of that trust is still alive. So long as there are beneficiaries to the trust, the trust will remain active and valid after the donor’s death. Because of this continuation, any assets that are in an inter vivos trust at the time of death of a donor will not be considered part of his probate estate. If property is not part of a probate estate then it does not need to be probated after the death of the donor. The avoidance of probate allows a donor to pass on property after death in an easier, cheaper, and more private manner.

 

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