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What is the Difference Between a Family Trust and a Living Trust?
The term Family Trust is really a type of Living Trust.
In general trusts may either be set up in a person’s Last Will and Testament (a “Testamentary Trust”) or they may be set up during the lifetime of the person setting it up (a “Living Trust”).
A Testamentary Trust set up in a person’s Will does not actually come into existence until the person passes away and his Will is probated.
A Living Trust, on the other hand, comes into existence while the person is still living. During the rest of that person’s life, he will typically be both the “trustee” (the person who runs the trust) and the “beneficiary” (the person for whose benefit the trust property is used). No one else has authority to change the terms of the trust or to complain about how the trust is being run.
Then, when that person passes away, the Living Trust agreement that he created will designate who will be the successor trustee (who steps in to run the trust) and the new beneficiaries of the trust (the persons for whom the trust property is to be used or to whom the trust property is to be distributed).
If the ultimate beneficiaries of the Living Trust are family members of the person who created the trust, the trust will often be referred to as a “Family Trust.” If those beneficiaries include friends, charities, or other non-family members, then the trust is typically called a “Living Trust.”
In short, a “Family Trust” is really just a special type of “Living Trust.” The terminology is otherwise interchangeable.