Most people think that the two main types of trusts are revocable and irrevocable living trusts; however, the two basic types of trusts are testamentary trusts and inter-vivos trusts. You more than likely know about revocable and irrevocable trusts, so now you might be wondering—what are inter-vivos trusts and testamentary trusts?
When estate-planning in Georgia, you need to understand the difference between testamentary trusts and inter-vivos trusts, which includes:
- Testamentary trusts are essentially set up under a last will and doesn’t go into effect until a person’s death. This means that a trust may be created upon the grantor’s death, and the trust is only funded after death. This type of trust is a non-grantor-type trust, involving probate court. Because it is governed by a will, it is public knowledge after the trust is filed for probate administration. Trustees of testamentary trusts have responsibilities to file annual account statements with the probate court, and they will be held liable if they fail to provide these documents to the probate court.
- Inter-vivos trusts are also known as living trusts, which are created and funded during a person’s lifetime. This means that this trust functions during a grantor’s lifetime. Inter-vivos trusts are not governed by wills; rather, they remain private because they can avoid probate court. These types of trusts can be funded before or after a grantor’s death, and they can be revocable or irrevocable. With this type of trust, property can be included or excluded from estate taxes.
Simply put, the main difference between the two trusts is that one trust is created when a person is alive, and the other is created after a person’s death.
For help determining what type of trust you want to create or what is best for your beneficiaries when estate-planning in Georgia, call the Law Offices of Shane Smith to speak with a Norcross estate planning attorney at (770) 487-8999 today.