Living Will vs. Trust: Definitions and Differences
Learn the Significant Differences Between These Two "Living" Documents
Do you need a living will or a living trust? And what's the difference anyway? Many people confuse the two because they're both estate planning options and they sound so much alike. But, in fact, living wills and living trusts serve two completely different purposes. They're effectively apples and oranges, with very little in common.
Think of it this way: A living trust covers three phases of your life, while you're alive and well, while you're alive but not so well, and after your death, whereas a living will covers only what happens if you are near death.
What Is a Living Will?
A living will is a document that allows you to explain your wishes with regard to what medical procedures you want or don't want in the event your health becomes critical and you can't voice your wishes. You might be in an irreversible coma or you're suffering from a terminal illness. You might have suffered a severe injury and you're not expected to fully recover. You're no longer lucid and can no longer express to your caregivers what steps you want to take to preserve – or not to preserve – your life. Do you want your heart resuscitated if it stops? Would you rather not be placed on a ventilator even if it means saving your life? A living will is specifically designed to deal with how you feel about life-ending versus life-sustaining procedures.
A living will can also address issues of palliative care and organ donation. It allows you to express your wishes at a time when your life is not yet threatened and you're thinking clearly – you can express everything in advance.
A living will can be incorporated into an advance medical directive, a legal document that allows you to designate someone else to make health care decisions for you if you're unable to do so yourself. An advance medical directive is not the same thing as a living will because a living will doesn't name or appoint anyone else to speak for you.
It simply states your wishes and under what circumstances you want health care providers to attempt to prolong your life or to cease life-sustaining measures.
What Is a Living Trust?
A living trust is a legal entity created by an individual to hold and own his assets after he transfers them into the trust's ownership. This property is invested and spent for the benefit of the beneficiary, who is typically the trustmaker himself – the person who created the trust. It's managed by a trustee, who is also usually the trustmaker, at least when the living trust is revocable.
One Small Similarity
About the only similarity between a revocable living trust and a living will is that both can safeguard against mental incapacitation. If you should reach a point where you're no longer of sound mind or physically able to handle your own financial affairs, the successor trustee you've named for your trust can step in and manage the property held in the trust for you. This happens automatically – there's no need for your family to involve the court, asking a judge to name someone as your conservator or guardian to handle your personal business.
A living will does much the same thing with regard to your health care, particularly when it's included with an advance medical directive – it takes care of your business and wishes when you can't.
Other than that, there's a big difference between having a living will and a living trust. If you're not sure if you need a living will, a revocable living trust or both, meet with an estate planning attorney to make sure you have all of your bases covered. There are other ways to pass your estate on to beneficiaries, but only a living will can unequivocally state your wishes for end of life.