Warning: Adult conversation ahead!
I lost a friend recently, and quite unexpectedly. Most of you don’t know me personally, or him. But this situation brought to mind many of the “adult conversations” we fail to get around to, and the “unfinished business” people often leave behind. So to that end, I would like to discuss today, briefly, two types of documents that are often confused, but are important to your family. The most important disclaimer is that I am not an attorney. You should contact one for further details about these documents and what your state or local laws have to say about them. There are also few sites online where you can download the preliminary documents. Or, as you can see in the picture above, stop at your local 7-eleven or Piggly Wiggly and pick up a form to begin the process.
The two terms living will and living trust may seem a bit vague. Oftentimes, people may even use the names interchangeably. But, you need to understand that a living will is different document than a living trust. Although both may share a number of similar characteristics, you have to know their exact definitions to be able to fully utilize them to your best advantage.
Living Will
This is a legal document that states your wishes regarding your health care decisions in the event of an major and potentially catastrophic health care issue like a terminal illness or a permanent vegetative state. This form of advanced directive will only take effect once you have shown evidence of incapacity to participate in the decision-making process with regard to your medical treatment.
Basically, the policies that govern the making and application of living wills are based on individual state laws concerning the matter. The statutes may be different from one state to another. So be sure to follow state-specific procedures to avoid conflicts since this is, after all, a lawful document.
Some states do not have particular laws pertaining to living wills. But here again, you may want to take advantage of the option to appoint a health care surrogate in case you become too ill to participate in making your own health care decisions. As the name implies, your surrogate, or stand-in, will act and decide on your behalf under the specifically mentioned circumstances.
Living Trust
In essence, a living trust is a written lawful document that partially takes the place of your will. It allows you to place all of your assets (i.e. residential properties, bank accounts, or stock shares) in a trust to be administered to your advantage for as long as you live. At the time of your death, all of your properties will be transferred under the names of your beneficiaries.
Most people choose to appoint themselves as the trustee in command of supervising all of the assets of the trust. In this way, you can still be in control of your stuff even though they have already been put into a trust. On the other hand, you may also choose to assign a successor trustee. This can be either an institution or a person, who will take over the task of administering the trust’s assets in case you become unwilling or unable to perform your duties.
So basically a living trust guarantees that your assets will be handled according to your preferences. That is if you become incapable of managing them for yourself. In setting one up, you may initially want to serve as its trustee. But its is probably a wise idea to also select a successor trustee while you’re still of sound mind to make the decision.
The trustee may take over the management of all your assets again, under specifically defined circumstances. And when you are gone, the successor trustee that you have appointed will act in a manner similar to an executor of a will. The usual functions will include things like gathering your assets, paying off your remaining debts, taxes and claims, and finally, distributing your properties according to your orders. Unlike a will, all of these tasks may be carried out without court approval or supervision.
In looking at these two documents, a living will nor a living trust tend to normally be considered top priorities. For a young couple just starting out, and without kids or noteworthy assets, these are probably not important things to consider. People with uncomplicated estate plans may not gain much from it too. But as we continue to mature, our lives tend to become more complicated and accumulative, so we should be thinking ahead for healthcare issues as well as the welfare of our children, grandchildren, etc.
So you see, a living will and a living trust differ in many ways. The first is usually appropriate for almost anyone, while the latter is typically viewed in a case-to-case basis.
These kinds of documents and other difficult conversations are important to have with the people we care about, and who care about us, while we still have it all together.
Thoughts?
Photo Credit: weegeebored via Compfight cc
Related articles
[…] about this stuff. But we are responsible adults, so we must. A few weeks ago, we talked about the difference between a living will and a living trust. I want to continue that conversation with you today and talk about something that is hard for us […]