The one estate planning document that most people have definitely heard of is the last will or last will and testament. This is a legally binding document that you can use to direct the way that your assets will be transferred after you die.
Because people equate a will with monetary asset transfers, some confusion can arise when it comes to the document that is called a living will.
A living will is not a vehicle that is used to transfer financial resources. You would use a living will to state your preferences with regard to the utilization of life-sustaining measures.
People who are incapacitated and unable to communicate can sometimes be kept alive through the utilization of artificial life-support measures, like feeding tubes, artificial hydration, and mechanical respiration. Doctors can sometimes keep terminal patients alive indefinitely using these measures.
When you create a living will, you express your wishes, and your life-support preferences would be honored if you were ever in this position.
Living Trusts
A living trust is in fact a legal device that is used to transfer monetary assets. Many people are aware of the existence of this type of document because they are rather commonly used.
Since some people have heard that you can execute an asset transfer vehicle that would be in place while you are living, they confuse living trusts with living wills.
When you convey assets into a living trust, you could act as the trustee and the beneficiary. To facilitate postmortem asset transfers, you would name a trustee to succeed you after your passing, and you would also name successor beneficiaries.
You create a trust declaration and leave behind instructions that the successor trustee must follow. This is an advantage that you gain when you use a living trust, because you can allow for ongoing, long-term distributions if this is your choice.
Assets will be distributed in accordance with your wishes after you die, and these distributions would not be subject to the probate process.
If you use a last will to direct asset transfers after your passing, the property would not be transferred to the heirs until the estate was probated by the court. This can take close to a year, even if there are no complications.
You can also account for the possibility of incapacity when you use a living trust. The successor trustee could be empowered to manage the assets in the trust if you were to become incapacitated at some point in time.
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