Understanding Living Wills vs. Living Trusts
In estate planning, there are so many legal documents to consider and the process can be extremely confusing. One of the many documents that people tend to confuse are “living wills” and “living trusts”. While they sound similar and have one major element in common, these two legal documents are very different. Let’s take a look at what they are and how they compare below.
What is a Living Will?
A living will is a legal document that outlines someone’s wishes for end-of-life medical care. Living wills are a type of advanced directive that explains instructions in the event that you can’t communicate for yourself. This could apply in a number of situations, from becoming unconscious during an accident, facing complications while in surgery, or falling into a vegetative state or coma that requires life support.
If you’re diagnosed with a terminal illness, fall permanently unconscious, or suffer a severe injury, a living will lays out what you do or do not prefer when it comes to treatment. The document addresses important questions you and your doctors may ask, including but not limited to:
- If you want to be kept on life support
- If you want certain medications (i.e. pain medications like morphine or other opioids)
- If you want certain procedures carried out (i.e. tube feeding, resuscitation, CPR)
- If you want your organs donated after death
Living wills only go into effect if you cannot communicate your wishes on your own. Problems can arise if you don’t have a living will and you become incapacitated. In most cases, doctors will turn to your closest family members to make decisions on your behalf. This can be extremely stressful, heart-wrenching, and could cause tension amongst your family. In some situations, a court order is required to end life support.
Either way, without a living will you have no voice in your end-of-life care and you place your family members in a very difficult position. We strongly recommend creating a living will with the expertise of a specialized health care attorney and having it notarized. The more specific your living will document, the better. For safe measure, sit down with your loved ones and review your wishes explained in the living will and answer any questions they may have. While this is a topic you probably don’t want to talk about, it’s better to be extremely clear about your end-of-life treatment than have a crisis that leaves your family panicked.
What is a Living Trust?
A living trust, on the other hand, is a trust that goes into effect during your lifetime as well as at your death. Any assets of value (think: personal property, life insurance, stock shares, intellectual property, etc.) are put into the trust and transferred ownership to the trust itself.
The grantor is the person who transfers the ownership of their assets to the trust fund. The grantor names a trustee, who is perhaps a relative or professional trustee. The trustee is responsible for ensuring the instructions in the living trust are carried out correctly. Finally, beneficiaries are specified in the trust document – these are the people who will inherit the living trust’s assets after the grantor dies. The instructions can vary and may be conditional. For instance, maybe their son, a beneficiary, must turn 25 before receiving shares of stock from the trust fund. Therefore, after the grantor passes, the trustee would make sure the beneficiary does not receive their inheritance until they reach age 25.
A traditional will provides instructions for distributing your assets after you die. A key difference between a will and a living trust is that living trusts provide instructions if you become incapacitated before you die.
There are two types of living trusts – revocable trusts and irrevocable trusts. Revocable trusts are able to be amended, changed, or cancelled by the grantor. On the other hand, irrevocable trusts are set in stone once signed and cannot be revoked or changed. Revocable trusts are the most common type, and you’ll find many people establish a revocable trust first and convert it to an irrevocable trust later.
Of course, once the grantor has died the trust automatically becomes an irrevocable trust, since the grantor was the only person with the authority to change it.
What do Living Wills and Living Trusts Have in Common?
Living wills and living trusts are very different, however, both living wills and living trusts secure and account for your assets and decisions should you become incapacitated. In the event that you are unable to communicate your wishes, the living will spells out your preferred medical affairs and the living trust lays out how you want your financial affairs managed.
If you’re unsure where to start, we recommend meeting with an estate planning attorney to review what you need. Living wills state your wishes for end-of-life care, while living trusts state your wishes for all of your property.