Paralegal Advanced Competency Exam (PACE) Practice Exam

Which of the following describes an inter vivos trust?

1. A trust activated upon death

2. A trust created during a person's lifetime

3. A type of testamentary trust

4. A trust established for minors

The correct answer is: A trust created during a person's lifetime

An inter vivos trust is specifically defined as a trust that is created and becomes effective during an individual's lifetime, as opposed to being established through a will and taking effect upon the individual's death. This type of trust allows the individual to manage and distribute assets while they are still alive, providing flexibility and control over how those assets are handled. This distinguishes it from a testamentary trust, which is set out in a will and only comes into effect after the death of the grantor. An inter vivos trust can also be useful for asset protection and estate planning during one's lifetime. It provides a structured way to manage assets and can benefit the grantor by potentially avoiding probate, ensuring that assets are distributed according to their wishes while they are still alive, and facilitating management during potential incapacity.