Key Estate Planning Tools
Last Will, Living Trust, Living Will: What They Are & What They Do
These three legal documents are often confused because their names sound similar. However, each of these documents serves a distinct purpose.
A Last Will can provide crucial instructions for the administration of your affairs after your death. This includes who will inherit your property (beneficiaries); when and how they will inherit it; and who will be put in charge of administering your estate (called a Personal Representative or Executor). If you have minor children, you can also use your Last Will to name a guardian to care for your children and create instructions for the creation of a trust (called a Testamentary Trust) to manage assets for the children after you’ve died. Wills are usually administered and enforced by the court in a process known as probate. If you do not have a Last Will, the court will make the determine who should administer your estate and inherit your assets by using your state’s intestacy laws.
The primary advantages of using a Last Will over a Living Trust are lower setup cost, simplicity, and flexibility. The primary disadvantage of using a Last Will is the potentially higher administration cost associated with the probate process.
A Living Trust is a tool used to transfer property to beneficiaries without going through the probate process. A Living Trust is a Trust that you create and fund during your life. These trusts can be either revocable or irrevocable. The revocable living trust can be amended or discontinued at any time whereas the irrevocable trust cannot be modified or discontinued once it has been established. Unlike a Last Will, a Living Trust is not typically subject to probate court, potentially reducing the time and expense of administering your estate. A Living Trust enables you to manage the trust property while you are living and competent and to name someone as your successor trustee when you are no longer able to manage the property yourself. As part of a Living Trust in Minnesota, you are required to transfer ownership of all the property you wish to place in the trust, meaning that the property moves from yourself as an individual to yourself as a trustee of the Living Trust. Because the trust is the owner of the property, management and control can quickly be shifted to your successor trustee if you die or become incapacitated. A Living Trust will generally remain confidential and not become a matter of public record.
The primary advantages of using a Living Trust are privacy, potentially lower administration costs through probate avoidance, and the ability of Trust to manage your assets in the case of incapacitation.
A Healthcare Directive, also called a Living Will, is a two-part document that allows you to plan important healthcare decisions in advance. The first part enables you to name a trusted person to direct your health care if you are unable to do so yourself. The second part allows you to dictate your wishes for end-of-life medical care such as whether or not you would like to be put on life support and for how long. It allows you to determine what types of care you would and would not like in certain situations when you would not be able to formulate or communicate your wishes in person. Without this document, family members and doctors are left to guess what you would want for medical treatment. A Living Will can be revoked at any time. A Living Will does not have authority after you have died, with the exception of possible decisions regarding autopsies and organ donations.