The names that are given to estate planning documents can sometimes be a source of confusion for the uninitiated, because there are certain terms that sound very much alike. However, they describe documents that accomplish very different aims.
With the above in mind, let’s look at the differences between living trusts and living wills.
Advance Directive for Health Care
You have undoubtedly heard of the document called a last will or last will and testament. Because a last will is used to facilitate the distribution of assets, it would be natural to assume that a living will does the same thing in a somewhat different manner.
In reality, a living will is not a financial transfer device. This type of will is an advance directive for health care. It is used to address an end-of-life issue.
Sometimes doctors can use artificial life-sustaining measures like artificial hydration and nutrition and mechanical respiration to keep terminal patients alive for indefinite periods of time. These people cannot communicate in many instances.
When you include a living will in your estate plan, medical professionals would be legally compelled to follow your instructions if you were to become unable to communicate your choices due to incapacitation.
Revocable Living Trusts
Unlike a living will, a revocable living trust is a legal device that can be used to direct postmortem asset distributions. The person who is establishing the trust is called the grantor, and in most cases, the grantor will choose to act as the trustee and the beneficiary at first.
Since the living trust is being used as an estate planning device, you would name a successor trustee and a successor beneficiary to assume these roles after you pass away. You could name a financially savvy person that you know to act as the successor trustee, but you could alternately utilize a corporate trustee like a bank or a trust company.
These trusts are quite popular, because they facilitate asset transfers outside of the process of probate.
When a last will is used as an asset transfer vehicle, the executor or personal representative would be required to admit the will to probate The heirs to the estate would not receive their inheritances until after the estate was probated by the court.
This can be problematic, because probate is time-consuming. It will take somewhere in the vicinity of a year at minimum, even if the case is uncomplicated.
The time consumption is one pitfall, but there is another: considerable expenses can accumulate during probate. Money spent during probate is money that would have otherwise gone to the inheritors.
These drawbacks are avoided if you use a revocable living trust as a vehicle of asset transfer. Assets in a living trust can be distributed to the beneficiaries outside of probate.
Contact Our Firm
We have provided a bit of clarity in this brief blog post, but you may have questions about other estate planning matters. If you would like to discuss your estate planning objectives with a licensed professional, contact us through this page to set up a free consultation: Grand Forks ND Estate Planning Attorneys.