To most, the terms 'living will' and 'living trust' may seem a little strange. Many times they may be used interchangeably. It is wrong when used this way. You need to understand that a living will is very different from a living trust. They do share some similar characteristics but when know their exact definitions you will be able to use them both to your advantage.
A "Living Will" is a legal document that states plainly what your wishes are regarding any health care decisions to be made should you be incapacitated by a terminal illness or enter a permanent vegetative state. A living will only takes effect once it is shown by evidence of incapacity that you are unable to participate in any decision-making in regards to your medical treatment.
Of course, state law will govern the application of living wills, the statutes being different from one state to another. Be careful when drawing up a living will and be sure to follow a state-specific procedure so as to avoid any conflicts. After all, this is a lawful document.
In simple terms, a living will tells the doctors and/or the legal system what your desires are should you be unable to make decisions regarding your health or any future directives that are your wishes.
A 'Living Trust' is a written lawful document that can take the place of a will. It allows you to place any or all of your assets in a trust to be administered to your advantage for as long as you live. The rich do this in order to pay less taxes. In the event of your death, all your properties will be transferred under the terms of the trust to those named as your beneficiaries.
The billionaire, H. T. Hunt, when he died, personally owned, only an old pickup truck, but his trust covered two pages of the Houston telephone directory. The billions of dollars were passed to his heirs for about one million dollars, showing the benefits of using trusts.
Basically a living trust guarantees that your assets will be handled according to your wishes. In setting up the trust, you may initially want to serve as its trustee. You should be thinking in the future, when it would be best that you select a successor trustee, while you still have a sound mind and can make thoughtful decisions.
When you are incapacitated or pass away, the successor trustee you have appointed will act similarly to an executor of a will. The functions will include; paying any remaining debts, taxes and claims against the trust; and distributing the properties of the trust according to your written orders. These tasks may be carried out without court approval or supervision which may save many, many dollars.
A living trust is usually not considered a top priority and not everyone would benefit a great deal from one. For a person with modest assets, a living trust would have no benefits as they are mostly used to lower taxes and pay less or no inheritance taxes.
A living will and a living trust definitely differ in a lot of ways. While a 'Living Will' is usually appropriate for almost everyone, a 'Living Trust' should be studied and applied typically on a case-to-case basis. For more information, go to your local library for more and up-to-date information.
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