Also known as: inter-vivos trust · living trust
Written by attorneys — see sources below.
A trust created during the settlor's lifetime that holds and manages property for designated beneficiaries. The trust exists and operates independently of the settlor's will or probate proceedings.
Isaac Irving executed a will that directed his brokerage account to the trustee of a trust he had created years earlier with Integrity Partners. The trust had been executed during his life but held no assets at death. The will provision transferred the account into the trust for distribution according to its terms.
Ian Iverson created an inter vivos trust holding movables located in multiple states. When a dispute arose over administration, the court evaluated contacts with each state under the most significant relationship test to decide which local law governed the trust terms.
Israel Irving served as both settlor and trustee of an inter vivos trust he funded with securities. After his death the executor argued the corpus should not be included in the estate because the retained powers were limited. The court examined the powers to determine tax consequences.
The executor paid the federal estate tax that included the value of the trust principal and filed suit for a refund in the district court. All facts were stipulated for the district court proceeding. The district court ruled for the government. The executor appealed to the United States Court of Appeals for the First Circuit. The decedent had been a donor to three inter vivos trusts previously established by his wife. He served as a trustee of the trusts until the date of his death. The initial life beneficiary was the decedent's adult son. Eighty percent of the trust income was normally payable to the son, with the balance added to principal. Subsequent beneficiaries were the son's widow and his issue. The trust instruments contained powers in Article 4 and Article 7. Article 4 permitted the trustees in their absolute discretion to increase the percentage of income payable to the son when needed in case of sickness or desirable in view of changed circumstances. The trustees could also cease paying income to the son and add it all to principal during such period as they decided the stoppage was for his best interests. Article 7 gave the trustees broad administrative powers, including discretion to acquire investments not normally held by trustees and authority to determine what was to be charged or credited to income or principal. It further empowered the trustees generally to do all things in relation to the trust fund which the donor could do if living and the trust had not been executed. The government claimed that the powers in the two articles required inclusion of the trust corpus in the decedent's estate. The executor disputed this position after paying the tax and seeking recovery. The district court had ruled against the executor on the stipulated facts, leading directly to the appeal.
View caseIain Irons transferred most of his assets into a revocable inter vivos trust naming himself as sole beneficiary during life. After his death his surviving spouse claimed an elective share. The court included the trust assets in the augmented estate for calculating the share.
Mary A. Sullivan, the widow of Ernest G. Sullivan, exercised her right under G. L. c. 191, § 15, to take a share of her husband’s estate. She filed an action in the Probate Court for Suffolk County seeking a determination that assets held in an inter vivas trust created by her husband during the marriage should be considered part of his estate. A judge of the Probate Court rejected the widow’s claim and entered judgment dismissing the complaint. In September 1973, Ernest G. Sullivan executed a deed of trust transferring real estate to himself as sole trustee. The net income of the trust was payable to him during his life, and the trustee was instructed to pay to him all or such part of the principal as he might request in writing from time to time. He retained the right to revoke the trust at any time. On his death, the successor trustee was directed to pay the principal and any undistributed income equally to George F. Cronin, Sr., and Harold J. Cronin, who survived him. Ernest G. Sullivan died on April 27, 1981, while still trustee of the inter vivas trust. He left a will stating that he intentionally neglected to make any provision for his wife Mary A. Sullivan and his grandson Mark Sullivan, and directing that the residue of his estate be paid over to the trustee of the inter vivas trust. The defendants George F. Cronin, Sr., and Harold J. Cronin were named coexecutors of the will, and the defendant Burkin is successor trustee of the inter vivas trust. On October 21, 1981, Mary A. Sullivan filed a claim pursuant to G. L. c. 191, § 15, for a portion of the estate. The parties state that Ernest G. Sullivan and Mary A. Sullivan had been separated for many years, and in 1962 the wife obtained a court order providing for her temporary support. At his death the husband owned personal property worth approximately $15,000, and the only asset in the trust was a house in Boston sold after his death for approximately $85,000. The widow appealed, and on July 12, 1983, a panel of the Appeals Court reported the case to the Supreme Judicial Court.
View caseIdris Ives executed trust instruments retaining broad powers to amend and revoke while naming himself income beneficiary. After his death the beneficiaries argued the arrangement was merely testamentary. The court assessed whether the retained controls rendered the trust invalid.
Albert B. Farkas died intestate at the age of sixty-seven years, a resident of Chicago, leaving as his only heirs-at-law brothers, sisters, a nephew and a niece. Although retired at the time of his death, he had for many years practiced veterinary medicine and operated a veterinarian establishment in Chicago. During a considerable portion of that time, he employed the defendant Williams, who was not related to him. On four occasions, December 8, 1948, February 7, 1949, February 14, 1950, and March 1, 1950, Farkas purchased stock of Investors Mutual, Inc. At the time of each purchase he executed a written application to Investors Mutual, Inc., instructing them to issue the stock in his name as trustee for Richard J. Williams. Investors Mutual, Inc., by its agent, accepted each of these applications in writing by signature on the face of the application. Coincident with the execution of these applications, Farkas signed separate declarations of trust, all of which were identical except as to dates. The applications and declarations of trust were delivered to Investors Mutual, Inc., and held by the company until Farkas’ death. The stock certificates were issued in the name of Farkas as trustee for Williams and were discovered in a safety-deposit box of Farkas after his death, along with other securities, some of which were in the name of Williams alone. Said coadministrators, Regina Farkas and Victor Farkas, filed a complaint in the circuit court of Cook County for a declaratory decree and other relief against Richard J. Williams and Investors Mutual, Inc. The decree of the circuit court found that said declarations were testamentary in character and directed that the stock be awarded to the plaintiffs as an asset of the estate. Upon appeal to the Appellate Court, the decree was affirmed. The Supreme Court allowed defendants’ petition for leave to appeal.
View caseIsmael Ibrahim placed assets in an inter vivos trust. After his death a dispute arose in bankruptcy proceedings concerning claims against the trust property. The court determined whether it had authority to adjudicate the trust-related issues.
Vickie Lynn Marshall married J. Howard Marshall II, Pierce Marshall’s father, approximately one year before J. Howard’s death. Shortly before J. Howard died, Vickie filed suit against Pierce in Texas state probate court asserting that Pierce had tortiously interfered with a gift J. Howard intended to provide her through a trust. After J. Howard’s death, Vickie filed a petition for bankruptcy in the United States Bankruptcy Court for the Central District of California. Pierce filed a proof of claim in the bankruptcy proceeding asserting a defamation claim against Vickie’s estate arising from statements made to the press by Vickie’s lawyers accusing him of fraud in controlling his father’s assets. Vickie responded by filing a counterclaim for tortious interference with the expected gift from J. Howard. On November 5, 1999, the Bankruptcy Court granted Vickie summary judgment on Pierce’s defamation claim. After a bench trial, on September 27, 2000, the Bankruptcy Court entered judgment for Vickie on her counterclaim and later awarded her over $400 million in compensatory damages and $25 million in punitive damages. The District Court concluded that Vickie’s counterclaim was not a core proceeding under 28 U.S.C. §157(b)(2)(C) and therefore treated the Bankruptcy Court’s judgment as proposed findings of fact and conclusions of law. The District Court conducted an independent review of the record. It declined to give preclusive effect to a Texas state court judgment that had been entered in Pierce’s favor. The District Court awarded Vickie compensatory and punitive damages, each in the amount of $44,292,767.33. The Court of Appeals for the Ninth Circuit reversed. It held that the Bankruptcy Court lacked authority to enter final judgment on Vickie’s counterclaim because the counterclaim was not so closely related to Pierce’s proof of claim that its resolution was necessary to resolve the allowance or disallowance of that claim. This holding made the Texas probate court judgment the earliest final judgment, which the Court of Appeals held the District Court should have afforded preclusive effect. The Supreme Court granted certiorari.
View caseAn inter vivos trust is created and takes effect during the settlor's lifetime. A testamentary trust is created by a will and arises only after death.
Yes. Assets properly transferred to an inter vivos trust during life pass directly to beneficiaries under the trust terms without entering the probate estate.
In many jurisdictions the value of assets in a revocable inter vivos trust over which the decedent retained control is included in the augmented estate for calculating the elective share.
…Pierce Marshall (Pierce), one of J. Howard’s sons, was the ultimate beneficiary of J. Howard’s estate plan, which consisted of a living trust and a “pourover” will. Under the terms of the will, all of J. Howard’s assets not already included in the trust were to be transferred to the trust upon his death. Competing claims…