The two terms living will and living trust may seem a bit vague. Oftentimes, people may even use them interchangeably. However, you have to understand that a living will is certainly different from a living trust. Although both may share a number of similar characteristics, you have to know their exact definitions for you to be able to fully utilize them to your advantage.
It is a legal document that states your wishes regarding health care decisions in the event of an unfortunate occurrence such as a terminal illness or a permanent vegetative state. This form of advanced directive will only take effect once you have shown evidence of incapacity to participate in the decision-making process with regard to your medical treatment.
Basically, the policies that govern the making and application of living wills are based on state laws concerning the matter. The statutes may hold differing views from one state to another. So be sure to follow state-specific procedures to avoid conflicts since this is, after all, a lawful document.
Other states may not have particular laws pertaining to living wills. Then again, you may take advantage of the option to appoint a health care surrogate in case you become too ill to participate in making health care decisions for yourself. As the name implies, your surrogate will act and decide on your behalf under the mentioned circumstances.
In essence, a living trust is a written lawful document that partly takes the place of a will. It allows you to place all your assets (i.e. residential properties, bank accounts, or stock shares) in a trust to be administered to your advantage for as long as you live. In the unfortunate event of your death, all your properties will be transferred under the names of your beneficiaries.
Most people opt to appoint themselves as the trustee in command of supervising all the assets of the trust. In this fashion, you can still be in control of your properties even though they’ve already been put into a trust. On the other hand, you may also assign a successor trustee – either an institution or a person – to administer the trust’s assets in case you become unwilling or incapable of performing your duties.
So basically a living trust guarantees that your assets will be handled according to your preferences – that is if you become incapable of managing them yourself. In setting one up, you may initially want to serve as its trustee. However, it would be best if you also select a successor trustee while you’re still of sound mind to make the decision.
The trustee may take over the management of all your assets under the mentioned circumstances. And in case you pass away, the successor trustee you have appointed will act similarly to an executor of a will.
The usual functions will include gathering your assets; paying any remaining debts, taxes and claims; and distributing your properties according to your orders. Then again, unlike a will, all of these tasks may be carried out without court approval or supervision.
In comparison to a living will, a living trust is not normally considered a top priority and not everyone would benefit a great deal from it. For instance, a young couple without kids and noteworthy assets do not require the creation of a living trust. People with uncomplicated estate plans may not gain much from it too.
On the other hand, wealthy individuals who prefer court supervision for the management of their estate should steer clear from living trusts.
So you see, a living will and a living trust definitely differ in a lot of ways. The first is usually appropriate for almost anyone, while the latter is typically viewed in a case-to-case basis.