Living Will vs Living Trust- What’s the Difference?
Do you want to know the difference between a living will vs living trust but don't know where to start? Read on and learn more here.
Both living wills and living trusts can be beneficial estate planning options but what is the difference? Though they seem related, they have quite distinct roles. A living trust is something you should think about if you want to manage the transfer of assets and money to your heirs. In addition, you use a living will to make medical care decisions.
With so many possibilities for drafting an estate plan, it becomes prudent to consult with an estate planning attorney who is well-versed in legal jargon.
What Is a Living Will?
A living will is a legally binding document that lets you define your preferences for medical care and treatment at the end of life. For example, let's say you're diagnosed with a fatal disease or fall into an irreversible coma. With a living will, a decision for the best course of action can be taken according to your wishes.
Living wills allow you to specify your wishes in a medical emergency. For example, you might say whether you want to be resuscitated or put on a ventilator. A living will might also state whether you want your organs or tissues donated after you die.
A living will informs those in charge of your care, of your wishes. This is not an advance healthcare directive. An advance healthcare directive is similar, but with one significant distinction. This document allows you to appoint a proxy to make medical decisions on your behalf.
What Is a Living Trust?
A living trust is a legal structure that lets you transfer property to a trustee's ownership. The trustee then has a fiduciary responsibility to oversee those assets on behalf of the trust's beneficiaries following your specified desires.
A living trust, also known as an inter vivos trust, is a form of trust that operates while you are still alive. You can act as your trustee, with replacement trustees nominated to take over if you die. Alternatively, you can appoint someone else to serve as a trustee. This could be an individual, a bank, or a financial advisory agency.
Revocable or irrevocable living trusts are available. The transference of assets to a revocable trust is not permanent as long as you are alive. That is, you can change assets, alter the beneficiaries, or change the rules of the trust's assets.
In contrast, an irrevocable trust comprises the permanent transfer of assets. You can transfer any of the following:
- Real estate properties
- Financial assets
- Specific securities
- Bank accounts
Next, you can establish the conditions under which your beneficiaries may access those assets. For instance, if you name your children, you may choose to require them to complete college or reach the age of 30 before receiving an inheritance from the trust.
Which to Choose? Living Will vs. Living Trust
Your financial position and objectives determine whether you need a living will or a living trust in your estate plan. Consider the benefits of adding either one or both to your estate planning.
Having a living will ensures that you won't get unwanted care or treatment. For example, if you are vegetative, you can inform your physicians and loved ones via a living will.
On the other hand, having a living trust offers many advantages, particularly for wealthier people. These benefits include:
- Unlike a will, assets kept in a trust are not subject to probate;
- If your estate owes creditors, trusts can protect your assets;
- You can decide how and when to notify heirs will;
- You can amend revocable living trusts during your lifetime to reflect changes in your financial circumstances;
- You could use them to reduce your estate taxes;
Like living wills, living trusts might be valuable in instances where you cannot act for yourself. For example, if you are a company owner and end in a coma, a living trust can govern how you manage your financial assets while you're incapacitated.
Living trusts can help you and your heirs in many ways. If you have an incapacitated family member, you might set up a living trust to keep assets for them. So, even after your death, those assets can be used to pay for any specific care they may need.
How to Create a Living Will or Trust
Visit a professional estate planning attorney to draw up a living will or trust. A lawyer can assist you in drafting a legitimate and legally binding living will. Additionally, they might help with the establishment of a concise living trust.
Living trusts are more complex than living wills or a last will and testament, and you'll need to make some decisions to build a living trust, such as:
- Who should be named as trustee
- Name any future trustees
- What assets should be transferred to the trust
- What assets should not be transferred to the trust
- Who are the people who will benefit from this
- How the assets should be managed
The first stage is to put pen to paper; the second is to finance the trust. This entails transferring asset ownership to the trust. Again, an estate planning attorney should assist with this to ensure that assets are assigned appropriately.
Once you've established a living will or living trust, it's critical to evaluate it regularly. If one of these has to be altered, your estate planning lawyer can advise how to proceed.
Living Will vs. Living Trust Difference?
You can distribute your estate in various ways, but only a living will firmly indicate your end-of-life preferences.
Are you considering drawing up a living will or living trust? Contact Citadel Law Firm for a free consultation if you're unsure if you need either or both. Citadel Law Firm offers estate planning packages at a fixed cost, they will include a living trust and a living will. Call today at (480)565-8020 or click here to schedule your free consultation.