A reader of the recent articles on Writing Your Last Will called to ask about a living trust and how it differs from a last will or even a living will. This article presents some of the differences.
First, a will comes into effect after the death of the testator.
On the other hand, the makers of a living trust provide for their wishes to be implemented while they are still alive, as well as after their death.
The maker of a living trust is called the grantor or the donor. The grantor can identify all or some of the assets owned, and then declare specific wishes for their distribution, just like in a will. A trustee (or trustees) is appointed to take fiduciary control of the assets on behalf of the beneficiaries of the trust.
The donor can be the trustee as well. However, it is important for a donor who also serves as a trustee to be one of a group of trustees or that an alternate trustee is designated in the event of the death of the donor; this will allow the trust to continue to be properly managed after the death of the donor.
A living trust is further complicated by the fact that it can be set up as a revocable trust or as an irrevocable trust. A revocable trust allows the donor to revoke the trust if it is not proceeding as planned or as acceptable to the donor. An irrevocable living trust does not allow such changes after it is established.
Obviously, committing to an irrevocable living trust involves significant reliance on the trustees and beneficiaries to act in concert with the thinking of the donor.
A living trust can serve as an alternative to a will in order to avoid possible lengthy delays in the probate of a will. One of the most attractive benefits of a living trust, whether revocable or irrevocable, is the privacy it provides compared to a registered will. A registered will is a public document that can be accessed by anyone for a small fee.
A living will is a completely different kind of document – instead of dealing with the distribution of the testator’s assets, it deals with the wishes of the testator with regards to the medical attention which the testator would like to have in the event the testator is not capable or is too ill to decide and/or declare.
Obviously, a living will reflects the testator’s belief about life, about certain medical care and about death. It may also reflect the testator’s belief about certain quality-of-life factors and about projections for full recovery to good health.
The living will would typically designate a preferred doctor, clinic, hospital and/or nursing home. A living will can also be where the testator accepts or rejects certain medical procedures or treatments like blood transfusions and/or the use of life support systems.
The testator can also spell out whether parts of his body can be donated for medical research.
A living will is one to be discussed with your family and with your preferred physician, particularly if you have strong, yet differing religious beliefs. That is entirely what wills are about – ensuring that your wishes are carried out to the very end of your life and beyond, with respect to the assets and property that you have accumulated.
• Louise Fairsave is a personal financial management advisor, providing practical counsel on money and estate matters. Her advice is general in nature; readers should seek personal counsel about their specific circumstances.