Living Will vs Living Trust
In the world of estate planning, there are similar terms that define very different planning goals. For instance, at Phelps LaClair, we hear this question a lot: “What is the difference between a Living Will and a Living Trust?” As a 2nd generation law firm, we have prepared estate plans with each goal in mind. Let’s look at the differences between these two common planning vehicles.
A Living Will is a planning instrument that sets forth certain medical directives, in the event that you become incapacitated and unable to make or communicate decisions regarding your treatment. This would be in cases where you become terminally ill, permanently unconscious, or mentally unable to make rational decisions, such as with dementia or Alzheimers.
By using a “Durable power of attorney for health care”, you can appoint a close friend or relative to make health care decisions for you in the event that you can no longer do so. You can specify whether this person can make all decisions for your health care, or whether they’re only given permission to make decisions for certain treatments. The medical professionals must follow the decisions outlined by your durable power of attorney for health care as if they are your own. You can also include a “Do Not Resuscitate” order in a Living Will when you and your doctor agree that your end is near.
In the same way that a power of attorney for health care covers medical treatment, there is another type of durable power of attorney that covers financial decisions. This financial durable power of attorney enables you to appoint an agent to make financial decisions with investment, banking, and retirement accounts. They can be authorized either immediately upon creation of the power of attorney documents, or by your doctor’s agreement, should the time come that you are unable to carry out your financial affairs by yourself.
With a Living Trust, a formal trust agreement is drawn up and signed. Then, ownership of most or all of your assets and property are conveyed to the trust. You become the grantor and the trustee of the trust and have full control of all of the trust’s assets and property. You also name beneficiaries, as well as a Successor Trustee who manages the trust’s assets in the way you have specified in the trust.
When you pass away, the trust avoids probate because you have named a Successor Trustee who will carry out the distribution of the trust’s property and assets. The beneficiaries of the trust will receive inheritances according to the terms you have already set forth in the trust. With a revocable living trust, you can change the named beneficiaries at any time, up until the event of your death or incapacitation.
Even though the names seem to be closely related, there is a vast difference between a Living Will and a Living Trust. For more than 40 years, Phelps LaClair has served the Phoenix Valley with expert estate planning solutions that are custom designed for each individual and family. Both Living Wills and Living Trusts are vehicles we recommend for complete estate planning packages. Give us a call to discover the many options available to you. Your first consultation is absolutely free. Together, we can find the plan that makes the most sense for your goals and your situation.