If you are starting to learn about different estate planning tools, you may find it confusing to distinguish between a living trust and living will. Each serve an important purpose in an estate plan, but they have distinct purposes, so it is important to understand the difference.
The following is an overview of the different roles that living wills and living trusts play in the estate planning process so that you can make an informed decision as to how to incorporate them into your estate plan.
A living will can be confused with a last will and testament. Whereas a last will and testament sets forth who will administer and receive your property after you die, a living will sets forth your health care wishes in the event that you become incapacitated. In other words, it is a document that expresses your preferences should you be unable to make decisions or voice them yourself. In Nevada, a living will tends to focus specifically on what extent you want life support or artificial nutrition devices prolonging your life in the event of your incapacity, as well on who would act on your behalf for your health care choices if you are unable to act for yourself. It is an important document that you should have in place as part of your estate plan.
A living trust is much different than a living will. A living trust is a legal document and entity that holds title to your assets, sets forth how and to whom your assets will be distributed upon your death, and also how those assets will be managed in the event of your incapacity. There are three primary parties involved in the creation and management of a living trust-(1) a grantor/settlor/trustor; (2) a trustee; and (3) a beneficiary.
The person who creates the trust is referred to as the grantor/settlor/trustor. The person who manages the trust assets is referred to as the trustee. The person who is entitled to the assets of the trust is referred to as the beneficiary. Typically, the person who creates the trust serves in all capacities while alive and competent. The trust will set forth who the trustee and beneficiaries will be in the event the creator of the trust dies or becomes incapacitated.
Living trusts are an effective way to administer your estate during your incapacity and upon your death. When properly drafted and managed, they can help you avoid guardianship and probate court proceedings, which otherwise can complicate the administration of your estate upon your incapacity and/or death.
Living trusts have become a foundational document in estate planning and you should consider executing one as you contemplate your own estate plan.