A trust that makes annual payments to a beneficiary while you’re still alive is an intervivos trust. If you set up a trust to become effective and start making payments after your death, you’ve set up a testamentary trust.
Unlike a testamentary trust, an intervivos trust generally doesn’t have to go through probate, but the probate court still has jurisdiction over an intervivos trust if any controversy or problems arise, just as it does for a testamentary trust.
If your primary objective in creating a trust is to provide an economic benefit (cash payments, transfer of real property that is currently in your estate, and so on) to specific people or institutions, some type of intervivos trust makes sense. Here are some benefits of an intervivos trust:
Payments and other types of property transfers may begin while you’re still alive.
You know what your estate is worth and how much is available to fund such a trust.
You have a higher degree of control with an intervivos trust than with a testamentary trust. When you set up an intervivos trust, you can initially fund the trust with certain property from your estate, add more property throughout your lifetime, and even make arrangements for additional property to be added to the trust upon your death.
If you aren’t particularly concerned about providing economic benefit to a trust beneficiary while you’re still alive, you can still set up an intervivos trust, or you can hold off on creating the trust until after your death and instead, create a testamentary trust under your will.
So how exactly do you set up a testamentary trust if you’re already dead? Actually, you lay the groundwork for a testamentary trust in your will while you’re still alive, which means the following:
You include appropriate language to set up a testamentary trust that, just like everything else in your will, doesn’t actually “come alive” until your death.
Your will goes through probate and must be in compliance with various will statutes Your testamentary trust also needs to be in compliance because it’s technically part of your will.
Which is better for your estate plan: an intervivos trust or a testamentary trust? It all depends! Intervivos trusts, together with plain old gift giving, are a good way to reduce your estate’s value and reduce or negate the effect of federal estate taxes.
On the other hand, suppose that you only want a trust to come alive if you die before a certain age and you want to make provisions for your minor children’s care, education, and so on. You can use a testamentary trust as part of your will. If you live long enough so that your children are no longer minors and are out on their own and don’t need to have money parceled out, you can revise your will and eliminate the testamentary trust provisions.
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Source:http://www.dummies.com/how-to/content/trust-fund-payment-plans-intervivos-and-testamenta.html
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