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.
Last Will and Testament
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
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
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.
Distinguishing Testamentary 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.
Do you have more questions?
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!
Disclaimer: The Law Office of Lori Vella’s website contains general information directed to Florida residents. This firm does not intend to give legal advice through its pages and/or blog. If you need legal advice, we encourage you to find an attorney licensed in your state. This language on this website does not create an attorney-client relationship between you and this firm.
Great content! Super high-quality! Keep it up! 🙂
Thank you. More blogs coming!
Attorney Lori
It’s great to know that a living will is the same as a recoverable trust that you can use. My parents are trying to plan out their estate this month because they are both turning 60. I think it’s a great idea to get this done now, instead of waiting until they are even older.
To clarify, a living will is an advanced directive. A revocable trust is very different. Yes, great idea for not only your parents, but everyone.
Thank you,
Attorney Lori
I want to make sure that I get my estate planned out properly. It makes sense that I would want to talk to a professional about this! I know for a fact that I will get living wills and last wills confused constantly if I don’t have someone to help me out.