An inter vivos trust is a living trust. It is a trust that you make during your lifetime and that involves transferring assets into the trust and naming a trustee to manage those assets. Usually, the trust creation or settlor is the initial trustee and a backup trustee is named. Trust beneficiaries who will inherit the living trust after the death of the settlor are also named.
An inter vivos trust can have many benefits, but it also has some limitations in regards to things that it cannot do. If you are thinking about asset protection and trust creation, you need to understand how trusts work and make informed choices about the kinds of trusts which will help you to accomplish your goals.
Sinclair Prosser Gasior can provide you with help with all aspects of trust creation, including making informed choices about the kinds of trusts that are best for your situation. Give us a call to learn more.
What is an Inter Vivos Trust?
According to the American Bar Association (ABA), “A living trust–an inter vivos trust if you want to be formal–allows you to put your assets in a trust while you’re still alive.”
A living trust is created by preparing a trust document with the help of your attorney. The process will involve naming a trustee and backup trustee, and designating a beneficiary. You must fund the trust by transferring assets into it. The inter vivos trust will become the legal owner of the assets transferred into it, instead of you being considered the legal owner of the assets.
Inter vivos trusts are generally modifiable and revocable, so you have flexibility when you create this kind of trust. You must follow formal Maryland requirements for trust creation in order to ensure you create a valid trust which offers advantages that you desire.
Why Do You Need an Inter Vivos Trust
There are many reasons why it makes sense for you to create an inter vivos trust. One of the biggest reasons why they are created is to avoid probate. The ABA indicates inter vivos trusts are one of the two most popular probate avoidance methods; joint tenancy or survivorship is the other.
Avoiding probate means there will be less costs faced by your family members and estate during the probate process. You can save a substantial amount of money by not having to go to court. You can also facilitate the transfer of the assets that you put into the trust in a more timely manner. Probate can stretch on for months, during which time there may be uncertainty about business interests and during which time investments and property may not be managed as carefully as they would by new owners. An inter vivos trust eliminates this period of uncertainty because trust assets can quickly transfer to new owners.
Inter vivos trusts can also help you to make sure that your assets are appropriately cared for in case of incapacity. By naming a backup trustee in your trust document, you vest authority in that backup trustee to take control over trust assets in the event something happens to you. You will not need to worry about your family having to initiate guardianship proceedings while trust assets remain unmanaged.
While all of these reasons are very good reasons to create a living trust, you also need to understand limitations of this type of trust. For example, assets held within a living trust are still considered your resources which can be spent on nursing home care, so you will not be able to get Medicaid to pay for coverage until you have spent down assets. The trust assets also are considered part of your taxable estate, which can trigger federal estate taxes and Maryland estate taxes. If Medicaid planning and/or estate tax planning are part of your goals, you need to talk with an Annapolis estate planning lawyer about the alternatives available.
Getting Help from an Annapolis Trusts Lawyer
Sinclair Prosser Gasior understands the rules for trusts in Maryland and we can provide you with details on when creating an inter vivos trust makes sense. We also help you to explore other types of trusts and other alternatives for asset protection and incapacity planning. Our goal is to help you accomplish your goals for your wealth and your loved ones, with the minimum of stress and with the strongest possible plan.
To find out more about how our Annapolis estate planning lawyers can help you with trusts, asset protection, and incapacity planning, give us a call at 410-573-4818 or contact us online.