How Is a Living Will Different from a Living Trust?

The idea of a “living” will is counterintuitive, isn’t it?

A will, after all, is a document you prepare to determine what will happen with your assets when you’re no longer living.  Except that a living will doesn’t really have anything to do with money.  And then there’s a living trust.  Which is, actually, much more similar to a will.  Confused? 

If you’re asking what the difference is between the two, the answer is, well, almost everything.  What the two documents do have in common, however, is that they are both created and take effect while you are living.  They are also documents you should use in your estate planning journey.

Living Trust

A living trust (for these purposes usually created as a revocable living trust) serves a similar purpose as a last will in that it provides for the distribution of your assets.  However, because this document is created and goes into effect while you are still living, you have the ability to continue to manage your assets as long as you’re mentally capable.

When a living trust is created, the assets assigned to it become the property of the trust.  Trustees, usually you (while you're alive) or a spouse, are "appointed" to manage the trust.  You can also hire a bank or trust company to serve as a trustee, although that option will incur a fee.  The trust is valid until you decide to revoke it, or upon your death, at which point most living trusts become irrevocable.

Living trusts are frequently used to avoid probate, a legal process in the court system, in which a person’s assets are distributed in accordance with a last will.  Because probate is expensive, time-consuming and a matter of public record, many people are eager to avoid it.  With a living trust, assets are not transferred from one person to another since the trust – and by effect the trustee – is already the owner of the assets.

If you create the living trust on ezEstatePlanner.com, it includes a pour-over will to provide for the guardianship of minor children and any assets that were not included in the trust.

Living Will

A living will really isn’t a will at all, at least not in the traditional sense.  Instead of managing assets, a living will states your end-of-life decisions and wishes for care, should you become incapacitated and unable to make these decisions in real time.  It is also known as a health care directive or advance directive, names that perhaps more accurately describe the document’s powers.

Living wills are specifically for medical situations in which providing treatment would artificially prolong a patient’s life.  The types of treatments specified may include life support, intravenous feeding tubes and the use of heart-lung machines.  A living will can also include your wishes for organ and tissue donation (although this is more commonly covered in a traditional last will).  In all fifty states, whether or not the patient is in such a situation is determined by doctors, usually the attending physician and at least one other independent doctor. 

A health care proxy, also known as a medical power of attorney, often complements a living will.  This document allows you to name a person or persons to make medical decisions in the event that you are unable to do so.  If you have a living will, then the agent or health care proxy is legally bound to carry out your wishes as best they understand them. 

No one can create or modify a living will except you, but it's important you do so while healthy, so there is no dispute later about your state of mind and mental capacity.

Managing Your Living Will & Living Trust

An interesting note about these two documents is that they can bring about a conflict of interests.  If, for example, someone were a beneficiary of your living trust, they might have a vested interest in you having a very liberal living will that leans toward no life-sustaining measures.

That’s one of the reasons you’ll want witnesses when you create a living will and living trust so you have proof that your wishes are indeed your wishes.  Some states require two witnesses and/or a notary present when you sign a living will.  In many states, at least one witness must be someone other than a relative or a physician.  Whether or not you need witnesses or a notary for a living trust depends upon the state, but both are a good idea.

As with any estate planning document, creating a living trust and living will now, not later, has two advantages:   1) The documents will be ready whenever you need them, and 2) You’ll have the luxury of time to make changes if your needs or wishes change.

Although living wills and living trusts serve very different purposes, one important characteristic they share is ensuring that your assets and your end-of-life care are managed as you desire, which offers peace of mind for you and your loved ones – now and in the future.