Difference Between Living and Testamentary Trusts

Trusts are classified in a few different ways. Sometimes trusts are distinguished as revocable or irrevocable trusts. But other times trusts are distinguished as living trusts and testamentary trusts.

A testamentary trust, in short, is a trust the terms of which are in your last will and testament. The trust does not exist and no assets can be in a testamentary trust until you die. For example, your last will and testament may have a provision similar to the following, "I leave my estate to a testamentary trust for my children until they reach the age of 30."

Creating a testamentary trust does not help you or your estate or your family avoid the probate (also known as the Louisiana "Succession"). When you die, your assets will be frozen and the courts must supervise the transfer of your assets from your name to your testamentary trust. Some people think that by setting up a testamentary trust, they are somehow avoiding probate. Those people who think that are wrong.

If a trust is not a testamentary trust, then it is a living trust. A living trust is also called, under the Louisiana Trust Code, an inter vivos trust. A living trust is typically a trust that you set up during your lifetime, and you transfer assets to it during your lifetime. One of the popular reasons people set up living trusts is to avoid probate. When you create your living trust during your lifetime, and you transfer title to your home and other assets to your living trust while you are living, then those assets will not need to pass through the court-supervised Succession proceeding when you die.