Estate Planning Tools

How are they different?

It can be difficult to discern between various estate planning tools. They can almost sound the same, but they each provide a unique function, so it is important to differentiate between them.

The difference between a Last Will and a Living Will

“Living Will” and “Last Will and Testament” sound similar, but are very different. The Living Will specifies what you wish done at the end of your life, while the Last Will and Testament specifies what should happen after you die.

A Last Will is used to distribute property to beneficiaries, specify last wishes, and name guardians for minor children. It is an important part of any estate plan. Without one, the courts will make these critical decisions for you. A Last Will can allow you to designate exactly how you want your assets and other personal property to be distributed to your friends, family and other loved ones after you die. A Will is probated through the probate court after you die. The directions of the Will are carried out by your personal representative, which is the person you designate before you die to carry out the instructions of your Will. A Last Will only goes into effect after you die.

A Living Will has nothing to do with property. A Living Will allows you a way to dictate what life support you want in case you ever become incapacitated with no reasonable expectations of a recovery. In a Living Will a person can often name who they want to be able to visit them, and often names a person to enforce your Living Will. A Living Will may also include whether you want to donate your organs or whether you want to be cremated. Living Wills are often called “Advanced Health Care Directives” or “Representation Agreement.” It does not go into effect until your doctor believes you have no chance of recovery and certifies that you have a terminal illness or are permanently unconscious.

The difference between a Testamentary Trust and a Living Trust

There are two basic types of trusts: Living Trusts and Testamentary Trusts. A Testamentary Trust is set up in a will and established only after the person’s death when the will goes into effect. A Living Trust or an “inter-vivos” trust is set up during the person’s lifetime.

Article reprinted with permission. It originally appeared in Senior Living Magazine May 2011