Voluntary Trust: What It is, How It Works, Example

What Is a Voluntary Trust?

A voluntary trust, also known as an inter vivos trust, is a type of living trust created during the trustor’s lifetime. In this type of trust, the trustor retains legal title to the transferred gift, while the beneficiary has actual title, possession, and control over the trust. It is an obligation that arises from personal confidence voluntarily accepted by one individual for the benefit of another. This is different from an involuntary trust, which is established by law.

Understanding Voluntary Trusts

Voluntary trusts are commonly used in estate planning. In the context of real estate, the person who controls the property is the trustee, and the individual who will receive the property is the trustor. The property itself is referred to as the "res."

In a voluntary trust, no consideration is made. The recipient of the trust doesn’t provide anything in exchange but receives it as a pure gift. This distinguishes voluntary trusts from trusts for value, which are created in favor of purchasers and mortgagees. Involuntary trusts can be further categorized as constructive or resulting trusts.

A voluntary trust can also refer to the interpersonal confidence between two individuals regarding an obligation for each other’s benefit. However, in legal terms, a voluntary trust is a formal structural setup that oversees an organization’s activities, including financial operations.

Example of a Voluntary Trust

Charitable and service organizations utilize voluntary funds to support their operations. The Trust Fund of the United Nations Alliance of Civilizations serves as an example. This organization established a voluntary trust fund based on recommendations from its High-Level Group through a special report. The primary objectives of the Trust Fund are to support the projects and activities of the Alliance of Civilizations, the initiatives undertaken by the High Representative, and core operational and human resources needs.