Planning for the Future: Living Trusts vs. Living Wills
It's important to know about the tools that help make sure your wishes are followed. Two key estate planning documents are living trusts and living wills. They might sound alike, but they do different things. Learn about what each document is, their benefits and how they are different.
What is a Living Trust?
A living trust, also known as a revocable trust, is a legal document that places your assets into a trust for your benefit during your lifetime. After you pass away, these assets are transferred to your designated beneficiaries by a trustee, whom you appoint.
Key Features of a Living Trust
- Avoids probate: Assets in a living trust do not go through probate, the court process required to validate a will. This can save time and money.
- Privacy: Unlike a will, a living trust is not a public record. Your estate remains private.
- Flexibility: You can change or revoke the trust at any time during your life.
- Continuous management: If you become incapacitated, the trustee can manage the trust assets on your behalf without court intervention.
What is a Living Will?
A living will, also known as an advance directive, is a legal document that outlines your wishes regarding medical treatment if you become unable to communicate them yourself. It specifies what kind of life-sustaining treatment you do or do not want.
Key Features of a Living Will
- Medical decisions: It covers decisions about medical treatments, such as resuscitation, mechanical ventilation and tube feeding.
- Guidance for healthcare providers: It provides clear instructions to doctors and family members about your healthcare preferences.
- Peace of mind: Ensures your medical care preferences are known and respected even if you cannot voice them.
Differences Between Living Trusts and Living Wills
While both documents are important for planning, they address different aspects of your future.
Purpose
- Living trust: Manages and distributes your assets.
- Living will: Outlines your medical treatment preferences.
Activation
- Living trust: Effective immediately upon creation but primarily used after death or incapacitation.
- Living will: Only comes into play if you are unable to communicate your healthcare decisions.
Flexibility
- Living trust: This can be altered or revoked during your lifetime.
- Living will: Typically remains in effect once created and is rarely altered.
Process
- Living trust: Involves ongoing management of assets.
- Living will: Focuses on one-time decisions about healthcare.
Which Do You Need?
Most people benefit from having both documents. A living trust can help manage your assets and provide for your family without the delays of probate. A living will ensures that your healthcare wishes are known and respected if you can’t communicate them yourself.
Simplifying Your Estate Plan
Estate planning is a critical step in ensuring your wishes are followed and your loved ones are taken care of. Understanding the roles of living trusts and living wills can help you make informed decisions about your future. Consider consulting with an estate planning attorney to create the documents that best meet your needs.