As an estate planning attorney, I’m often asked casual questions in daily conversations. Over the years, I’ve come to find that most confuse four estate planning terms that, well, sound very similar. The four most confusing estate planning terms are: Living Will, Living Trust, Last Will and Testamentary Trust. Luckily, your days of confusion are over. Read on to clarify and distinguish each term so that you can stop confusing these four estate planning terms.
Do not Confuse a Last Will with a Living Will
A Last Will and Testament is a written document setting forth your identity, your family members, payment of your debts and the desired distribution of your property. At times, it contains provisions regarding your death (burial vs. cremation), but in general, it deals with all matters after death. It is filed in the Probate Court after death, usually by the Personal Representative. Having a Last Will is important so that your family does not need to guess and determine how, and to whom, you wanted to distribute your assets. It is just another piece to making sure you have your estate in order, and to make your death easier for your family. Preparation is key.
A Living Will is a Health Directive, so Don’t Confuse it with a Last Will
A Living Will, on the other hand, is a document you complete now to make decisions for later, if necessary. A Living Will basically sets forth your desires for life-extending procedures (such as a feeding tube) if you happen to find yourself in the end-stages of an incurable disease. You do this just in case there comes a time when you lack the ability to make these decisions for yourself. You may never use it, and that’s a good thing. That should not stop you from getting one. It is also called an Advanced Directive (because you are making a directive, in advance). Many complete this form so that their loved ones do not need to make these tough decisions. Understandably, it is a great burden for any person to make these types of calls for another.
Living Trusts Should Not be Confused with Last Wills
A Living Trust (or Revocable Trust) is a legal document created during a person’s lifetime for immediate use. Once formalized, you immediately start to re-title any assets that will go into the Trust. The trustee holds legal title to the property per the trust agreement. The trustee is usually you, the person who started the Trust. The purpose of the trust is to plan for death or incapacity. If that occurs, a successor trustee would take over, and the property is seamlessly managed. The property within the trust is ultimately distributed by the trustees to your named beneficiaries, as set forth in the trust agreement.
Testamentary Trusts Differ from Living Trusts
A testamentary trust may be created by the provisions inside of a Last Will. Basically, the Last Will would contain a few paragraphs which state that the Personal Representative should form a Trust under certain conditions. The trust is not needed now, while you are alive. It does not exist, and may never exist, until the conditions necessary to create it have occurred (for instance, a person has died with a minor or you want to leave an income to your spouse). If the triggering event occurs, the trust is formed as you directed, assets placed into it, and the property is ultimately held for or distributed to your beneficiaries. This type of trust will never become a living trust or revocable trust. It cannot be revoked, just like a Will cannot be revoked after death.
I hope this blog will help you to stop confusing these four estate planning terms by giving a little explanation as to each term.
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Based out of Tampa, Florida, Lori is mom to a fantastic 5-year-old boy. They love to go on local adventures, travel and play with matchbox cars for seemingly endless hours. Lori enjoys reading classic novels, organic gardening, and studying languages with her son. She considers herself well-versed in Seinfeld and welcomes any trivia!
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