Many people confuse living wills with living trusts because they're both types of estate planning options and they sound so much alike. Both can be useful under certain lifetime situations, but living wills and living trusts actually serve two quite different purposes. A living trust covers three phases of your life, while a living will only cover what happens if you become incapacitated.
What's the Difference Between a Living Trust and a Living Will?
|Living Will||Living Trust|
|States your end-of-life health care decisions so there's a record of them if you're unable to express them yourself||Can appoint a successor trustee to manage your assets if you become incapacitated|
|Becomes null and void at your death||Can distribute your assets according to your wishes after your death|
A living will is a document that allows you to explain your wishes regarding the medical procedures you want or don't want if your health becomes critical. It comes into play when—and only when—you can't voice your wishes yourself.
A living trust is a legal entity created to hold and own your assets after you transfer them into the trust's ownership. This property is typically invested and spent for the benefit of the trust maker—the person who created the trust—and, eventually, their beneficiaries.
How a Living Will Works
You might be in an irreversible coma or maybe you're suffering from a terminal illness. You're no longer lucid, and you can no longer express the steps you want taken 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. It can also address issues of palliative care and organ donation. It allows you to express your wishes in advance when your life is not yet threatened, at a time when you're thinking clearly.
A living will can only cover one stage of your life—when you're near death and unable to express your wishes yourself.
How a Living Trust Works
A living trust is managed by a trustee, and the trust maker usually serves in this role when the living trust is revocable. Different rules apply to irrevocable trusts.
It's common to name a successor trustee—someone to step in and manage the trust—should the trust maker become mentally incapacitated and unable to do so.
A living trust helps manage your affairs while you're alive and well. It also serves to maintain the status quo while you're alive but not so well, and at your death. Your successor trustee will disperse the trust's assets to the beneficiaries named in your trust documents when you die, or they might keep the trust up and running according to your wishes if that's what you've chosen.
There are two types of living trusts: revocable and irrevocable. The trust maker cannot act as trustee of their irrevocable trust and must relinquish any right to ever take the assets back into their personal ownership. These trusts have some other advantages, however.
Another Thing to Consider
You can incorporate a living will into an advance medical directive. This legal document allows you to designate someone else to make health care decisions for you if you're unable to do so yourself. But an advance medical directive isn't the same thing as a living will. It's a separate document.
You don't name or appoint anyone to speak for you in a living will. It merely states your wishes in advance and explains under what circumstances you want health care providers to attempt to prolong your life or to cease life-sustaining measures.
The Bottom Line
One similarity between a revocable living trust and a living will is that both safeguard against mental incapacitation. Your successor trustee takes over the management of your trust if you should reach a point where you're no longer able to handle your financial affairs. A living will can do much the same thing concerning your health care. It expresses your wishes if a time comes when you're unable to do so.
Meet with an estate planning attorney to make sure you have all your bases covered if you're not sure if you need a living will, a revocable living trust, or both. You can pass your estate on to beneficiaries in numerous other ways, but only a living will can unequivocally state your wishes for end of life.