# Voluntary Trust: What It Is, How It Works, and Example

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## What Is a Voluntary Trust?

A voluntary trust is a type of [living trust](https://www.investopedia.com/terms/l/living-trust.asp) that is created during the lifetime of the trustor and is also known as an [inter vivos trust](https://www.investopedia.com/terms/i/intervivostrust.asp). A voluntary trust is also defined as an obligation arising out of a personal confidence reposed in, and voluntarily accepted by, one individual for the benefit of another. This is in contrast to an involuntary trust, which is created by law.

### Key Takeaways

*   A voluntary trust is a living trust.
*   It is also known as an inter vivos trust.
*   A voluntary trust is typically part of an estate plan.

## Understanding Voluntary Trusts

Voluntary trusts are often used in [estate planning](https://www.investopedia.com/terms/e/estateplanning.asp).

With real estate, the person who controls the real estate property is known as the trustee, while the individual who will receive the property after it is being held is known as the [trustor](https://www.investopedia.com/terms/t/trustor.asp). The property itself is referred to as the res.

In a voluntary trust, the recipient of the trust gives nothing in exchange for the trust but receives it as a pure gift. By avoiding receiving something in return, voluntary trusts are distinguished from trusts for value, which are trusts made in favor of purchasers and mortgagees. The opposite of a voluntary trust is an involuntary trust, which can be further broken down into constructive or resulting trusts.

In some cases, a voluntary trust can simply refer to the interpersonal confidence between two individuals regarding an obligation for the benefit of each other, or one individual in the relationship. However, in legal terms, a voluntary trust is a formal structural setup that can oversee an organization’s activities and, in some cases, its financial operations.

> **Fast Fact**
>
> Many types of charitable and service organizations operate voluntary funds in order to maintain operations.

## Example

As an example of how a voluntary trust can work, take a look at the Trust Fund of the United Nations Alliance of Civilizations. Through a Special Report made by the organization’s High-Level Group, it was recommended the Alliance establish a voluntary trust fund. As the organization explains via its website, the primary objectives of the Trust Fund are to support the projects and activities of the Alliance of Civilizations and the activities and outreach initiatives undertaken by the High Representative in his official capacity, and also to assist with core operational and human resources needs.

## What Is a Trust?

A trust is a legal framework that enables a trustee to hold assets for the purpose of distributing them to a [beneficiary](https://www.investopedia.com/terms/b/beneficiary.asp). It is typically used when developing an [estate](https://www.investopedia.com/terms/e/estate.asp) plan, in order to minimize estate taxes. A trust can be structured in response to your goals, such as how and when you want your funds to be inherited.

There are several types of trusts, including a marital trust, a testamentary trust (as outlined in a will), an irrevocable life insurance trust, and a generation-skipping trust (for grandchildren or later generations).

One main difference is whether a trust is revocable or irrevocable. A revocable, or living, trust is changeable and dissolvable. It allows you to bypass [probate](https://www.investopedia.com/terms/p/probate.asp) but not estate taxes. An irrevocable trust, on the other hand, is permanent. It often bypasses probate and estate taxes.

## What Is Probate?

Probate is a legal process that recognizes [a will](https://www.investopedia.com/terms/l/last-will-and-testament.asp) and distributes the assets of the deceased. It varies by state. "Most probate proceedings are neither expensive nor prolonged, which is contrary to the claims of many vendors selling living trust and other products," states the American Bar Association.

## Why Is a Trust Better Than a Will?

A trust offers more privacy and also streamlines the process of your beneficiaries receiving your [bequests](https://www.investopedia.com/terms/b/bequest.asp). This is because a trust, unlike a will, allows your estate to bypass probate, which is a public process.

## What Are the Disadvantages of a Trust?

A trust is typically more expensive than a will. It's also more complex to execute, requiring more steps and information from you. A trust must be funded with your assets; they must be assigned to the trust. This requires a comprehensive inventory. All in all, a trust is complicated and requires follow-through.

## The Bottom Line

A voluntary trust is a living trust. With a voluntary trust, or an inter vivos trust, the trustor retains the legal title of the gift transferred to the beneficiary, even though the beneficiary has actual title and possession and ability to carry out actions of the trust.

> **Article Sources**
>
> 1.  United Nations Alliance of Civilizations. "[Voluntary Trust Fund](https://www.unaoc.org/who-we-are/voluntary-trust-fund/)."
>     
> 2.  American Bar Association. "[The Probate Process](https://www.americanbar.org/groups/real_property_trust_estate/resources/estate-planning/probate-process/)."