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Using An Inter-Vivos Trust For Succession Planning

Using An Inter-Vivos Trust For Succession Planning
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Using An Inter-Vivos Trust For Succession Planning


The management of a deceased’s affairs can be a contentious issue. The way in which a deceased’s estate is distributed may divide a family, and disgruntled heirs may even feel compelled to contest a will in Court.

For a person seeking certainty that their affairs will be dealt with efficiently and in a manner that best reflects their personal wishes, they may wish to consider the use of an inter-vivos, or ‘living’ trust for succession planning purposes. This blog will provide a brief overview of the advantages of using an inter-vivos trust for succession or estate planning, and compare it with a testamentary trust.

Inter-Vivos Trusts

An inter-vivos trust is established during the settlor’s lifetime, the effect being to divest the settlor of ownership of assets.

The trust documents can stipulate how any trust assets or income are to be managed, and can include provisions to provide for those most in need. For example, a beneficiary of a trust may be entitled to receive distributions on a regular basis or at the discretion of the trustees.

Upon the death of the beneficiaries, the remainder of the assets could be paid to an ultimate default beneficiary, such as a charity. A trust may continue to exist long after the settlor is deceased, subject to any relevant perpetuity rules.

The flexible nature of an inter-vivos trust means that it can be used for a number of reasons. For example, given that non-traditional family structures are now commonplace, an inter-vivos trust could be used to ensure that persons whose right to benefit from a settlor’s estate would otherwise be limited are adequately provided for.

Inter-vivos trusts can also be used to provide for vulnerable parties or those with diminished competence, such as a spouse who lacks financial expertise, a spendthrift child or a disabled and/or elderly family member. Further, an inter-vivos trust can be used to protect the continuity of a family business without the need for any shares to be transferred from the trustee.

An inter-vivos trust may also assist a settlor who resides in a jurisdiction with forced heirship provisions. However, it is important to mention that if a trust is settled with the clear intention of disinheriting lawful heirs, the trust may be at risk of being set aside. 

Testamentary Trusts

A testamentary trust is one which takes effect upon the death of a settlor. It is therefore treated as part of a will, meaning that the appropriate legal procedures have to be followed, including admission to probate (where it becomes a public document). Therefore, there may be a delay before an estate can be distributed. By contrast, an inter-vivos trust is a private document and as its affairs are governed by the trustees, it is not affected by the death of the settlor and can go about its business as normal.

Final Comments

Before establishing an inter vivos or any other type of trust, it is crucial that detailed and jurisdiction-specific legal advice is sought by the settlor.

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