Sometimes estate planning language is confusing because there are terms that overlap such as simple wills, living wills, and living trusts.Let’s take a look at these terms and explain how they differ from one another.
The Simple Last Will
Most people are aware of what a simple will generally accomplishes. With your simple will you can express your wishes regarding the desired transfer of your assets after you pass away. A will must be introduced to probate and be admitted by court order or else it is not valid and operative for carrying out your inheritance plan.
In the will you also name an executor/rix or personal representative. This individual will be charged with the hands-on responsibilities of the process of probate. An executor or PR can also be a trust company.
If you are the parent of minor children you should also nominate a guardian who would be empowered to care for the children if both parents were to pass away. There is a guardian of the “person” of the minor child, who will have your parental rights and responsibilities. There is a guardian of the “estate” of the minor child, which is the money or property you leave for the child. The two positions can be filled by the same person or different persons, subject to probate court approval. You can nominate the guardian(s) in your will. Some states allow a nomination of guardians under a separate writing also.
People sometimes confuse living wills and simple wills.
Under a living will, you state your preferences regarding the utilization of artificial life support measures such as feeding tubes and ventilators. Your choices recorded in the document apply in the event you are incapacitated or unable to communicate your wishes on your own. This legal document has nothing to do with the transfer of financial assets at your death. Similarly, your simple will does not relate to medical treatment decisions.
Revocable Living Trusts
People often confuse living trusts and living wills.
Revocable living trusts are used by people who want to avoid probate, among other reasons. The trust is in effect while you are alive, and you maintain control of the funds and assets you put in the trust. It is a stand-by device, which means it is silent and invisible until it is needed. Its primary role is to serve as a substitute for a simple will by directing who inherits your estate, the timing and other stipulations you wish to apply to an inheritance, and who is in charge of settling your estate. Due to the nature of a living trust, this can be done without a probate proceeding, as long as it is properly “funded” during your lifetime.
Another advantage of a living trust is that it can be activated during your lifetime if you become incapacitated, and allow management of your affairs without probate court involvement. It also eliminates the need for a guardianship of the estate of an heir who is a minor.
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