There are some overlapping terms used in the field of estate planning, and this can lead to misconceptions. With this in mind, we are going to look at the difference between a living will and a living trust in this post.
Wills and Trusts for Asset Transfers
Most people are aware of the fact that a will can be used to state your final wishes with regard to asset transfers. In a general sense, they know that trusts serve the same purpose, but there are differences that a layperson would not fully understand.
This can lead to the belief that any time you hear the term “will” as it applies to estate planning, monetary asset transfers are involved, but this is not the case.
Advance Directives for Health Care
In addition to the facilitation of postmortem asset transfers, a well-constructed estate plan will address end-of-life matters. This dynamic may not come to mind immediately, but if you think about it, you may not be able to communicate when you are on your death bed.
Elders that live normal lifespans can be in this position, and younger people can become unable to express their choices after sustaining injuries in devastating accidents. Your estate plan should address this possibility, and this is done through the utilization of advance directives for health care.
One of these directives is a living will, and its purpose has nothing to do with money. When you draw up a living will, you express your preferences regarding the use of life-support methods like ventilation, artificial hydration and nutrition, resuscitation, etc.
You can be specific with regard to the way you feel about each different life-support technique, and the document can include your organ and tissue donation choices. If you have comfort care medication preferences, you can express them in your living will.
While we are on the subject of advance directives, you should also have a durable power of attorney for health care or health care proxy. In this document, you name someone to make medical decisions on your behalf that are not related to life-support.
The Health Insurance Portability and Accountability Act (HIPAA) is in place to protect patient privacy. Doctors are not allowed to release medical information to anyone other than the patient, so you should include a HIPAA release to give your representative access to the records.
A living trust is the document that is used as an asset transfer vehicle, and it is a device that is ideal for a wide range of people. One major benefit of a living trust over a simple will is the efficiency of the estate administration.
When you have a living trust, you will be the trustee while you are alive and well, and you name a successor to take over the role after your death. The successor trustee would be empowered to distribute the assets to the beneficiaries in accordance with your wishes outside of probate.
On the other hand, a will would be admitted to probate, which is a costly and time-consuming legal process. It takes place under the supervision of a court, and anyone that wants to contest the will can present a case while the estate is being probated.
With regard to incapacity, in addition to purely physical medical conditions, a significant percent of elders become unable to handle their own affairs due to cognitive impairment. To account for this, you can name a disability trustee to assume the role in the event of your incapacity.
A living trust can provide spendthrift protections. You can include a spendthrift clause, and the principal will be protected from the beneficiary’s creditors after your passing. In the trust declaration, you can instruct the trustee to provide incremental distributions to limit the beneficiary’s spending capabilities.
Schedule a Consultation Right Now!
Today is the day for action if you are going through life without a legacy plan. You can schedule a consultation at our Westport or Glastonbury, CT estate planning offices if you call us at 860-548-1000, and you can use our contact form to send us a message.