Most everyone knows about Wills and Trusts – two distinct estate planning documents. When it comes to a Living Will and a Living Trust, however, their functions may be blurred. These also serve particular roles: A Living Will lets you express your health care preferences while a Living Trust allows you to hold assets for beneficiaries during your lifetime.
What is a Living Will?
This document is your voice when it comes to what type of medical treatment you want or do not want when you cannot speak for yourself. Do you want to be resuscitated? Would you want a feeding tube? If you should become incapacitated due to a serious illness or an accident, a Living Will empowers you to convey your health care choices.
How To Set Up a Living Will
Your values, self-sufficiency, independence, and family circumstances all should be considered when you make your medical treatment decisions. If you are in a vegetative state, the last stages of a mentally debilitating disease, or an irreversible coma, what would be your choices for:
- Life sustaining treatment?
- Life support?
- Palliative care?
- End-of-life care?
- Antibiotic/antiviral medications?
A Living Will makes your health care wishes known to your family and doctors. For your loved ones, this saves them the burden, conflict, and anguish over making decisions on your behalf. For you, it ensures your wishes will be carried out.
In addition to a Living Will, you should also have a Health Care Proxy. You name a person that will make and carry out your medical decisions if you cannot.
Fortunately, Gentreo’s Health Care Proxy includes options to express your end of life healthcare wishes in a way similar to a Living Will.
What is a Living Trust?
A Living Trust is designed to allow you – while you are alive – to transfer your assets into a Trust that is overseen by a person you designate as the Trustee. The assets are held in the Trust for beneficiaries of your choosing who would receive them after you die.
Once placed into the Living Trust, the assets are no longer part of your estate. Your home, property, vehicles, retirement and bank accounts are among the assets you can transfer into a Living Trust. The Living Trust must be funded – meaning that you cannot just write up a Trust. Assets must be transferred into it in order for it to be effective.
You have the option to act as Trustee, giving you full control. However, a successor Trustee should be chosen who would take over if you become incapacitated.
Revocable and Irrevocable Living Trusts
There are two types of Living Trusts:
Irrevocable Living Trust – This Trust cannot be revoked, amended or changed once it is created. You lose all ownership and rights to the assets. The Trust owns and controls the assets you transfer into it.
Revocable Living Trust – It allows you to have control over the assets even though you no longer own them. You can receive any income earned, such as interest or dividends, and it is taxable. This Trust allows you to amend or revoke it at any time.
Do I Need a Living Trust?
There are many benefits for having a Living Trust:
- Avoid Probate – Unlike a Will, assets in a Living Trust do not go through probate and go directly to beneficiaries upon your death.
- Safeguard Your Children – Put aside money or investments for your minor or disabled children now to help them financially later. Funds can be distributed without court involvement. The Trust can even hold and distribute funds as needed for those adult children who may not be so good managing their finances.
- Creditor Protection – Assets in a Living Trust cannot be touched by creditors. This allows protection from lawsuits due to unpaid bills or a divorce.
- Ensure Privacy – The assets and beneficiaries are never made public unless there is litigation involving the Trust.
Generally, most people with smaller estates do not need a Living Trust. For most people, a Will is sufficient. It all depends upon your needs and circumstances. For more information about the differences between Wills and Trusts, check out our article comparing a Last Will & Testament vs. Living Will: What’s the Difference?
How To Create a Living Trust
You do not need an attorney to create a Living Trust, and it is not that complicated. There are online agencies – like Gentreo – that offer an easy process to set one up.
Both documents are different, designed for two specific purposes, and should be part of your comprehensive estate plan. Gentreo offers a range of estate planning documents and more so that you can protect your choices, your assets and loved ones.