There is a lot of misinformation and misunderstanding about last wills, living wills and living trusts.
While nobody likes to think about their own mortality, preparing both a will and a living will can save your loved ones from having to make a lot of agonizing decisions when you are no longer able to speak on your own behalf.
Let’s take a look at the different terms first:
- (Last) Will: a legal document that stipulates how to distribute your property after your death.
- Living Will: a legal document that stipulates your health care wishes in case of a terminal illness or serious injury.
- Trust: a legal entity that is given control over your assets.
- Living Trust: a legal agreement, created while you are alive, that lets you control the distribution of your estate, by transferring the ownership of your assets to the trust.
- Probate: a legal process used by the probate court to distribute your assets.
Since everybody’s circumstances are different, not all of these strategies may necessarily be the best for you. Before heading to your lawyer’s office and spend a lot of time – and therefore money – on setting up a legal structure that doesn’t really serve your needs, it’s a good idea to get more informed. A lot of information is available online to help you determine which option best fits your situation.
Beware of scams, though! The complex world of probate and estate taxes is fertile ground for less-than-honest businesses that organize “living trust seminars” or in-home presentations, in order to sell you on the document preparation or gain access to your financial information. The Federal Trade Commission (FTC) has also issued a warning regarding so-called “living trust kits”, where consumers receive a do-it-yourself kit in exchange for a fee. While a living will is easy to set up by yourself, a living trust is far more complicated and requires expert legal advise! Remember that unfunded or poorly drawn trusts can actually cost you more and torpedo your best intentions to avoid probate.
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