Understanding Living Trust/Inter-Vivos Trust

Introduction
In order to ease the transfer of assets without going to follow the process of probate, a
living trust supposed to be an agreement in which the trustee would hold the legal possession
of assets that would eventually belong to beneficiary and it was created during the trustor is
alive. In further understanding, inter vivos is a legal term that referring the transaction is done
during the lifetime and quite opposite from the testamentary transfer in which only could take
effect on the death of trustor. The rationale of a person opt to this is because they want to
establish a trust but want to avoid probate as the process could not be denied as lengthy and
expensive. The other reason is because they want to avoid the disclosure of a familys private
financial matters in which by the process of probate, their familys private financial matters
would become a public record. The other rationale behind this is because the trustor intended
that all the assets in wish to go to the wish recipients in a timely and private without the need
to disclose to the public. In order to make an effective and valid legal documents of a living
trust, several elements must be satisfied including the existence of trust property, the
identifiable beneficiaries, trustee and a declaration of trust.
Understanding the elements in living trust
The first elements that need to be presented is a trust property. The ownership of
property involving different interests in which are legal and equitable.1 The legal referring to
the right to possess the property meanwhile equitable referring to the rights to receive any
benefits from the property that being held in trust. After the property being held in trust, the
title should split into two when the trustee hold the legal title meanwhile the beneficiaries will
hold equitable title of the property. By this, the trustor could control the disposition and
management of the intended property by describing the method of handling it in a document
entitled declaration of trust.
The second element are the beneficiaries in which have the rights to enjoy the property that
being held in trust.2 In living trust, the settlor would be deem as a trustee and beneficiary and
by this, the settlor would still enjoy and control their own property while still alive. The
1 'What Are The Elements In A Legal Living Trust? | Yoexpert Q&A' (Wills-andestate-planning.yoexpert.com) <http://wills-and-estateplanning.yoexpert.com/wills-and-estate-planning-general/what-are-the-elementsin-a-legal-living-trust-32102.html> accessed 17 September 2016.

beneficiary would only take control when the trustor died. Identifiable beneficiary meaning
that the name does not need to specifically state since it is sufficient to just state the settlors
children. However, the settlor could also be precise in the name of intended beneficiary in
order to avoid confusion in future.
The third element is the declaration of trust in which the need to specifically stated the terms
and conditions including the names of the trustee and beneficiary.3 In this document, the
settlor would describes on what he/she intended to the property in trust after they died.
Situation that living trust could be incomplete
The living trust might be incomplete when the trustor failed to fund the trust in other words,
the transferrable of property failed and the trustor still the legal owners of the property. Other
than that, poorly done a legal document would also render the agreement to the
incompleteness.4 The other thing is that, the impossibility to find the beneficiary of the result
of death, moved or changed names despite the uncertainty should not be fatal to the status of
the trust as being pointed out by Wynn-Parry Judge.

The Mechanism of living trust.

The inter vivos trust would enable a person to gain benefit from the intended asset for
the rest of their life but without ultimately inheriting from it. The trust would enable the
beneficiary to gain benefit to live in their property, or to gain the return of any invested funds
or to receive the benefit of monetary from the rental income for the rest of their life. In this
trust, anyone could become a trustee with the condition that they must be over eighteen years
2 'What Are The Elements In A Legal Living Trust? | Yoexpert Q&A' (Wills-andestate-planning.yoexpert.com) <http://wills-and-estateplanning.yoexpert.com/wills-and-estate-planning-general/what-are-the-elementsin-a-legal-living-trust-32102.html> accessed 17 September 2016.
3 'What Are The Elements In A Legal Living Trust? | Yoexpert Q&A' (Wills-andestate-planning.yoexpert.com) <http://wills-and-estateplanning.yoexpert.com/wills-and-estate-planning-general/what-are-the-elementsin-a-legal-living-trust-32102.html> accessed 17 September 2016.
4 Schneider Richard B., 'Why Your Living Trust May Be Incomplete - Law Offices
Of Richard B. Schneider, Llclaw Offices Of Richard B. Schneider, LLC' (Rbsllc.com,
2011) <http://www.rbsllc.com/living-trust-incomplete/> accessed 17 September
2016.

old in which in line with the requirement of majority age in Malaysia. Family member or
friend could be a trustee and even a trustor could appoint a professional Trustee Company
that specialises in legal, accounting or financial planning. The trustee should be the legal
owner of the trust assets with a duty to manage these in the best interests of the
recipients/beneficiary as being outlined in the trust deed.
Many kind of assets can be held in trust including investment, any property including
land, cash and anything that would be deemed as being valuable such as furniture, jewellery
or even a painting as long it could be identified and clearly defined as being state in the case
of Palmer v Simmonds.5 Other than that, the assets would grow resulting in the capital gains
for the trust in a situation of the money used in investments that would be likely produce
some income from the gain of interest or dividends as being laid down in the principle in the
case of Hunter v Moss. 6
In revocable living trust, the trustor would still retain the right to manage their property and
has the right to change the terms of the trust, trustee and the property that being held in trust
during a lifetime.7 Other than that, living trust will keep in continue even after the death and
could keep benefitting all the intended beneficiary up until the grandchildren. This type of
trust actually give flexibility to the trustor to distribute the property accordingly. Even in the
situation the beneficiary dies first, the property will revert back to the trustor unless the trust
property already being named of other beneficiary for those gifts. A living trust could also
contain any other trust for different beneficiary.
In the irrevocable trust, it is slightly different from the revocable trust. In this trust, it cannot
be revoked and will takes effect during the life of the testator. Some people opt to this type of
trust in order to avoid taxes in which the trustor fully give up the control over the trusted
property in return for the incomes or gift taxes. 8 In most people opt this type of trust in order
5 [1854] 2 Drew 221
6 [1994]
7 'Living Trust' (american bar)
<http://www.americanbar.org/content/dam/aba/migrated/publiced/practical/book
s/wills/chapter_5.authcheckdam.pdf> accessed 17 September 2016.
8 'Living Trust' (american bar)
<http://www.americanbar.org/content/dam/aba/migrated/publiced/practical/book
s/wills/chapter_5.authcheckdam.pdf> accessed 17 September 2016.

to give the trust property to charity-charitable remainder trusts. However, it is need to be

reminded that, even this type of trust could not escape the obligation of taxes fully as it is
only sets up separate taxable entity and only resulting to pay the taxes at lower rates.

Conclusion
In conclusion, the living trust would bring some benefits over the probate. However, this trust
does not render to the need of the will itself. Other than that, the living trust could not control
the disposition of jointly owned property. In the part of revocable living trust, it does not
totally protect the property from the creditors since the property will not have a probate
administration and lose protection of statute limitation and thus it is not necessary could
avoid from the creditors. However, the irrevocable trust could become shield from creditors
with the consequences of losing the control over it.

Bibliography
'Living Trust (American Bar)
<http://www.americanbar.org/content/dam/aba/migrated/publiced/practical/books/wills/chapt
er_5.authcheckdam.pdf> accessed 17 September 2016
Richard B. S, 'Why Your Living Trust May Be Incomplete - Law Offices Of Richard B.
Schneider, Llclaw Offices Of Richard B. Schneider, LLC' (Rbsllc.com, 2011)
<http://www.rbsllc.com/living-trust-incomplete/> accessed 17 September 2016

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