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Written by Thomas Upchurch
The language of estate planning can be complicated and confusing, especially when components of the estate plan that serve very different purposes have similar names. Living wills and living trusts are among the most commonly-confused estate planning documents, though they serve very different purposes. And, the fact that a living will serves an entirely different purpose from a will adds to the confusion.
Of course, a local estate planning attorney is the best resource when it’s time to create a legal structure to protect you and your loved ones. In the meantime, this primer will clear up some of the confusion about living wills, living trusts, and why you might want one or both.
Creation of a living will allows a person to provide advance instructions regarding life-prolonging measures if he or she should become incapacitated and be in a persistent vegetative state or have a terminal or end-stage condition. Without a living will or other appropriate directive, the difficult decision as to whether to continue care will fall to close relatives, who may struggle with the decision. End of life decisions may even trigger serious conflicts among family members during an already-challenging time.
Although the living will plays an important role in healthcare planning, it addresses a very narrow set of circumstances. Many critical medical decisions that might arise while a person is unconscious or otherwise incapacitated fall outside the scope of a living will. Therefore, most people who create living wills also create other advance healthcare directives, such as appointment of a healthcare surrogate to make medical decisions on your behalf when you are unable.
Though a living will is unrelated to a last will and testament and has nothing to do with passing property after death, a living trust does. Many people use a living trust to pass property without going through probate.
When the living trust is created, the grantor transfers most or all of his property into the trust. The trust becomes the owner of the property, but the grantor is both trustee and beneficiary of the trust. As such, he continues to use the property in the trust as he sees fit, for his own benefit. However, when the grantor passes away, a successor trustee takes charge of the trust, and manages it for the benefit of those the grantor designated.
This process can be more efficient than passing assets through probate, and also gives the grantor greater control over the way assets are used after his death. For example, the trustee may be directed to pay out a certain sum to each beneficiary on a monthly or annual basis, or to pay specific expenses on behalf of beneficiaries.
Living wills and living trusts address two key areas of estate planning: provision for medical care and a means of passing property to heirs and beneficiaries after death. However, there are many other areas to be considered in formulating an estate plan that protects you and your family. Talking to a local estate planning attorney can be the first step toward securing your loved ones’ futures.