Planning your estate can become confusing with all the similar terms and the various documents that can be used. If you don’t have an understanding of the differences and nuances of each type of document, your expectations may not be met.
You have heard the term “will,” which refers to a legal document that identifies your final wishes for asset distribution, guardianship, and other legal matters upon your death. There is a similar term called a “living will,” which is a legal document that also identifies your wishes, but not upon your death.
A living will relates to your care in the event that you are terminally ill. For example, what medical procedures you want, or don’t want, to receive if you are in an irreversible coma. A living will can be incorporated into a ”proxy directive,” which allows you to appoint a healthcare representative to make healthcare decisions on your behalf. Your healthcare representative should be a person in whose judgment you trust. Another name for the proxy directive is “limited power of attorney for healthcare.”
Another term, similar to the term “living will” is a “living trust,” which is also called a “revocable trust.” A living trust is a legal document created by an individual (trustmaker) to hold assets, which are then invested and spent for the benefit of a beneficiary.
The beneficiary would be the trustmaker since he or she is still alive. So the creator of the trust becomes the “trustmaker,” the “trustee” (or the person responsible for managing the trust), and the ”beneficiary.”
The living trust is also called a revocable trust because the trustmaker may revoke or cancel it at any time before death. Upon the trustmaker’s death, a subsequently named trustee would take over the management of the trust for the benefit of a subsequently named beneficiary.
The differences between a living will and a living trust are in the timing of their effectiveness. A living will is only valid when you are near death and it only pertains to your medical care. On the other hand, a living trust relates to three phases of your life: when you are alive and well, when you are alive and not doing well, and after your death.
The living trust provides financial security for you during life and directly transfers these finances to a subsequent beneficiary upon your death. Unlike a living will, the living trust does not provide for your choice of medical care nor does it direct who can make decisions about your medical care.
Additionally, the living trust would have to incorporate a power of attorney in order to identify someone to manage your finances should you become incapacitated due to illness. That person may or may not be the subsequent trustee.
When you compare the living will and the living trust, you find that there are big differences and the only thing similar about them is their first name, “living.”
If you are not sure about whether or not you need one or both of these documents, contact an estate planning attorney in your state of residence.
Information contained in this article is not intended to be legal advice nor applicable to all situations. For legal assistance, contact an attorney in your state of residence. You can visit Arleen’s website at arleenrichards-law.info.
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