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What is the difference between a trust and a living will?

Status: Open    Mar 05, 2015 - 07:34 PM

Elder Law

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Jul 22, 2015 - 10:42 AM

You might as well have asked "What is the similarity between a trust and a Living Will?" They are completely different planning tools, although there is some overlap I will admit.

The Trust is a tool to hold ownership of a person's assets, usually to avoid the probate process, and manage those assets for the rest of a person's life. If the person loses capacity, a successor trustee steps in to manage the assets for his or her benefit. At death, the trust assets pass to whoever is named as a beneficiary.

A Living Will is a healthcare document that states what a person wants at the end of life when death will occur without the intervention of artificial, life-sustaining treatment. It does not manage assets and doesn't own anything. An Advance Directive for Healthcare is a similar document that appoints another person to make healthcare decisions if/when you can't make them anymore.

So the overlap is that a Trustee can make some healthcare decisions for the person who created the trust, and if that person also signed an Advance Directive for healthcare, whoever is appointed in that document can make healthcare decisions as well.

Jul 22, 2015 - 11:37 AM

A living will is sometimes called an “advance directive.” In a living will, a person memorializes, in advance, in writing certain end-of-life decisions. Even if a person has executed a healthcare power of attorney appointing an attorney-in-fact to make medical/personal decisions for them, a living will “carves out” some and resolves some of these decisions, so that the attorney-in-fact need not make the decisions but simply follow the directive. A living will also creates much-needed certainty for the person’s doctors.

In VERY general terms, a trust is a legally enforceable agreement whereby a person conveys assets or property to another person (or back to him/herself as trustee) to hold in trust for the benefit of someone else. Usually, a written trust agreement will govern the duties, rights, restrictions, and powers of the three primary parties in trust – i.e., the settlor(s), the trustee(s), and the beneficiary(ies). A trust creates a fiduciary relationship between the person named as trustee and the beneficiary or beneficiaries of the trust.

A settlor can establish a trust during his/her life (you’ve probably heard of a “living trust” also called an “inter vivos trust.”) A person can also provide for a trust in his/her last will & testament, which will not be established until after his/her death (called a “testamentary trust”).

There are many, many types of trusts, all serving different purposes and objectives. The Tennessee Legislature has recently modernized the trust laws in Tennessee in an effort to encourage the growth of trust business in this state. The overall result is that Tennessee is now considered to be at or near the forefront of “trust-friendly” states.

Jul 23, 2015 - 12:38 PM

A revocable living trust is an arrangement through which one's property is owned by a "trust," not the individual. A person may transfer his or her property to the trust to be held for his or her benefit during his or her lifetime. The individuals creating the trust are typically named as trustee and have the power to revoke, change, and amend the trust agreement. Once the individual(s) pass away, the trust property passes according to the trust agreement. This arrangement is favorable under the following circumstances: 1.) to avoid probate, 2.) to preserve privacy because, unlike a Will, a trust agreement is not filed with the court and made part of public record, 3.) to avoid proceedings in other states if folks own real property outside of Washington.
A living will is actually also known as a Health Care Directive. The Health Care Directive enables someone to make end-of-life decisions that are to be followed under the proper circumstances. This document is typically recommended as part of one's estate plan, along with a Power of Attorney and either a Will or Trust.
A living will, or Health Care Directive, is often confused with a Last Will and Testament (Will). A Will is a document through which persons may give, devise, and bequeath their property according to the terms in the Will. This is an alternative arrangement to a revocable living trust.

Jul 23, 2015 - 12:52 PM

The term “living will” usually refers to a declaration by an individual that they do not want to be kept alive through artificial means if certain circumstances occur, such as imminent death due to illness or injury, or permanent loss of consciousness. It does not deal with money or property, only with that narrow scope of medical care.

On the other hand, a trust is a tool to manage money and property through a trustee for the benefit of certain beneficiaries under certain rules set up by the maker of the trust.

Jul 23, 2015 - 02:08 PM

A trust is a set of instructions for how you want your money spent upon your disability and how it is to be distributed upon your death. You can leave detailed instructions to your trustee to make sure your wishes are carried out, and you can distribute your assets to whom you want, when and how you want. A living will is an advanced health care directive which basically states that should you become permanently unconscious or terminally ill and dying within a short period of time, you do not want to be hooked up to life support systems.
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