This article is intended for educational purposes only and is not legal advice. For guidance on your personal situation, please contact a lawyer.
Many people could confuse living trusts and living wills. Indeed, their names are quite similar and they involve the same broad, and perhaps uncomfortable, topic of what to do about you and your assets if you die or become unable to make those decisions.
They're also both important legal documents that can go a long way to ensure your wishes are met when that time comes. Together, they can be key parts of a broader plan to meet the realities that are coming your way sooner or later.
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A living will is an advance healthcare directive
A living will is an advance healthcare directive, a legal document that outlines your wishes for medical care if you become incapacitated and unable to make decisions. You're typically asked if you have one when you agree to many kinds of medical procedures.
Basically, a living will lays out your directions including whether to use life-prolonging treatments such as CPR, feeding tubes, dialysis, and pain medication. A do-not-resuscitate (DNR) order is another type of advance directive that can be included in your living will. In effect these all empower you to make choices in advance of being unable to speak for yourself.
Such guidance is critical to your family and your healthcare providers in these fraught situations, and it provides peace of mind to those who are acting on those decisions.
A living trust passes assets to heirs like a will, but with some key differences
A living trust actually is much more akin to what you might think of as a will, if what you're thinking of is a last will and testament. The latter is a legal document in which you lay out how you want your assets distributed when you die.
A living trust, meanwhile, is a legal arrangement used to manage assets during your lifetime and distribute them after your death. You'll often hear it used interchangeably with the term revocable trust.
It allows you to place your assets, like your home, bank accounts, or investments, into a trust, and as long as it's revocable you can change it anytime you're alive and still in charge of your own affairs.
You name a trustee -- and it can be you -- to manage the assets for the designated beneficiaries, including any distributions. You also need a successor trustee to distribute the assets according to your wishes after you die.
The biggest difference between living trusts and wills is that that the former typically involves final approval by a probate court, a public process. A living trust typically avoids probate and remains private.
You might want both in your estate plan
The living will covers your healthcare wishes when you no longer can make those decisions. The living trust does the same with your financial affairs while you still can and afterward. They serve complementary roles in a wisely crafted estate plan.
They also don't lend themselves easily to do-it-yourselfers. It's always smart to consult a qualified estate attorney to make sure these plans are handled appropriately.
