An Inter Vivos Trust (also known as a 'Living Trust') is a legal arrangement you create during your lifetime—inter vivos is Latin for “between the living.” Think of it as a special container you create to hold your valuable possessions. You, the creator (the ‘grantor’), transfer ownership of your assets—like your stock portfolio, real estate, or bank accounts—into this container. You then appoint a manager (the ‘trustee’), who has a fiduciary duty to look after the assets for the benefit of the people you choose (the ‘beneficiary’ or beneficiaries). The magic of a living trust is that it operates while you're alive and continues seamlessly after you pass away. This is in sharp contrast to a ‘testamentary trust’, which is created through a will and only springs into existence after your death, meaning it must first go through the court system.
Setting up a living trust involves a few key players and simple steps. It's less about complex finance and more about smart organization.
The process is straightforward: you work with an attorney to draft the trust document outlining your wishes. Then, you “fund the trust” by retitling your assets in the trust's name (e.g., changing the owner of your brokerage account from “Jane Doe” to “The Jane Doe Revocable Trust”).
For a savvy investor, a living trust isn't just an estate planning tool; it's a critical component of a long-term wealth management strategy.
Living trusts generally come in two main varieties, each with a different purpose.
This is the go-to option for most people. A revocable trust is exactly what it sounds like: you can change it, amend it, or cancel it entirely at any time. You can pull assets out or put new ones in whenever you wish. It offers maximum control and is primarily designed for probate avoidance and incapacity planning. However, because you retain so much control, the assets are still considered yours for tax purposes and are not protected from creditors.
An irrevocable trust is a much more rigid structure. Once you place assets inside and the terms are set, you generally cannot change them or take the assets back. Why would anyone do this? In exchange for giving up control, you gain powerful benefits. Assets in an irrevocable trust are typically protected from your future creditors and, crucially, are removed from your estate, which can significantly reduce or eliminate estate tax for very wealthy individuals. This is an advanced strategy for high-net-worth investors focused on asset protection and tax minimization.
Value investing is a discipline built on long-term thinking, patience, and the preservation of capital. A living trust is the legal embodiment of this philosophy. It’s a tool for stewardship. Creating a trust isn't about chasing a fleeting market trend; it's about building a durable structure to protect the wealth you’ve carefully accumulated over a lifetime. By placing your well-researched portfolio into a trust, you ensure that your assets are managed according to your long-term vision, both during your life and long after. It prevents your hard-won capital from being eroded by legal fees or exposed in public court records. In essence, a trust allows a value investor to apply their principles of prudence and foresight not just to what they own, but to how they own it, securing their financial legacy for generations to come.