Understanding the Difference Between Living Trusts, Living Wills, and Wills
Sometimes the terms living trust and living will are thrown around as if they are interchangeable, but they are different from each other and also different from a traditional will.
Living Will
A living will deals with your medical care, not your assets and property. It is technically a health care directive or an advance directive. It is not a will in the traditional sense, but a legally binding document wherein you declare how you wish to be treated in a medical emergency. Arizona law requires that living wills contain the following elements:
- Be in writing
- Show clear intent
- Dated
- Signed by an adult
- Witnessed by at least one other adult or notary public
An example of where a living will would be used is a serious car accident that requires you to be transported to the hospital and put on artificial respirators. Medical staff will ask you or your family members if you have an advanced directive on file that expressly explains your intent.
You might be wondering what the benefit is of a living will and whether you need one. One benefit to a living will is to help your family make difficult decisions during an emotionally challenging time. Making hard decisions while under extreme emotional stress is not something anyone wants to put their loved ones through. Also, it is easier to sit down and make important medical decisions when you are not facing a life or death situation.
Medical directives can dictate more medical decisions in addition to life support. Some of these include:
- Resuscitation
- Feeding tube
- Dialysis
- Antibiotics
- Organ and tissue donation
If your living will is included with a health care power of attorney, it only needs to be in writing, and there is no need to comply with additional execution formalities. If it is not part of a health care power of attorney, its execution must satisfy the same execution requirements as a health care power of attorney as noted in ARS § 36-3261.
A health care power of attorney allows you to choose an agent who can make healthcare decisions for you, if you can not make those decisions for yourself. This individual may be your spouse, friend, church member, or other family member. You have the option to name more than one agent in case the chosen one is not able to fulfill his or her duties, and you can set limits on what types of decisions the power of attorney allows them to make.
Will
A regular will is a written document that directs the disposition of your property after your death. You will elect a personal representative who you want to handle your affairs, typically referred to as an executor. The executor manages and distributes your estate according to your final wishes. If you have a minor child or incapacitated adult of whom you are in charge, you can nominate a person to serve as a guardian and/or conservator in your will.
If you die without a will, your estate will be distributed according to Arizona law on which heirs will be entitled to receive your assets.
Some terms you might hear in association with a will include:
- Holographic will: This is a handwritten will by the person making it, and it needs to be signed by that person. Although a date is not necessarily required, it is beneficial to have so the court can proceed.
- Codicil: This is the term used when simple changes are made to the original will. The codicil is the amendment itself.
Some people mistakenly believe that wills are only for people who have large assets to distribute and divide. Wills can help communicate your wishes on a small estate or even distribute important personal effects.
There are other documents and accounts in your life that may be distributed differently, which is due to specific named beneficiaries on accounts like IRAs, annuities, life insurance, and retirement plans. Be sure to check all your current beneficiary information on these accounts when preparing your will.
What is Probate
When you have a will, your assets will go into probate upon your death. Aside from being a costly experience, it can take a considerable amount of time to wrap things up. That means that all your assets are essentially frozen until the matter is resolved. Because they require a great deal of attention to help protect individuals and their property, these matters are heard in a dedicated probate court. The word probate comes from the Latin term, probare, which means to prove. Historically, probate included a process that would determine the legality of the decedent’s will, in a sense, proving that it is authentic and assets are meant to go where the will indicates they should.
Probate courts hear not only matters of actual probated estates, but also matters like elder fraud, conservatorship, and guardianship. Once the named executor is approved, he or she is responsible for paying the estate’s debts and then distributing the remaining assets.
In some cases, there may not be assets to probate. There is a threshold in Arizona that real property within the state valued at under a certain dollar amount can pass via affidavit instead of probate. This applies to personal property valued under a particular dollar amount, as well.
As mentioned before, there may be certain accounts that will not need to be probated, either. Insurance policies, IRAs, annuities, bank accounts, and securities held as TOD (transfer on death) or ITF (in trust for) all pass directly to the named beneficiary. There may be some instances in which real property that is held as community property or joint tenancy with right of survivorship will not need to undergo probate either.
Property going through probate can go quickly if the involved parties are not contesting the will or fighting over anything. However, if siblings are fighting or someone challenges the validity of the will, it can tie up the assets in court for months or longer.
This is why choosing a trustworthy personal representative, or executor, is important as he or she has the difficult task of following the disbursement requests. However, sometimes the executor becomes the one on whom fighting family members take out their frustrations. The personal representative also assumes some risk, being personally liable if estate taxes are not filed and paid. Some of the duties of a personal representative are:
- Locating and collecting assets
- Obeying all court instructions and orders
- Paying all estate debts, including any owed taxes
- Deal with estate beneficiaries and ultimately distributing the estate assets as directed in the will or Probate Court’s order
Because of the amount of work required by a personal representative, the state allows for some “reasonable” compensation. A personal representative should always keep a log of hours worked, description of services rendered, and how much time they spent on each task.
Living Trust
Now that you understand more about what a living will is versus a regular will, you might still be wondering what a living trust is and how it differs from a traditional will. Like a will, a living trust allows you to name beneficiaries for your assets. They are primarily used to skip having to go through probate.
However, living trusts can be more complicated, and there are some things a living trust cannot do, like name an executor or guardians for your children. A living trust can prevent you from undergoing a lengthy and potentially expensive probate process, but it also requires more work, like a transfer of property into the trust’s name. Typically, an adult will manage the trust until a child’s 18th birthday. For many assets, you a list of the personal property is attached to the trust document, except for the real estate, which is retitled into the trust name. We prepare the Quit Claim Deed to retitle your real estate to the Trust for you.
Upon your death, a will becomes a public document, whereas a living trust does not, which is why many people use them to keep their affairs out of the public eye. Unlike wills, living trusts also must be signed and stamped by a notary public.
There are some benefits to living trusts, aside from avoiding having your assets go through probate. These are:
- Tax savings: A trust arrangement can sometimes reduce your estate taxes for a married couple
- Beneficiaries: Living trusts may protect younger beneficiaries who are too young to receive their entire inheritance at once
- Incapacity: If you become incapacitated, a trust arrangement allows for named trustees to manage assets rather than having to get a court-appointed conservator
What Wills and Living Trusts Can Not do
It is important to understand the limitations of both wills and living trusts, and this is where legal questions may arise that require the services of a licensed estate planning attorney. Here is a look at some of the common things wills and living trusts can not do:
- Reduce estate taxes: Neither a will or a living trust will help you reduce estate taxes. In many cases, your estate may not even owe estate tax, but it is important to know that neither option will reduce this potential debt.
- Funeral instructions: While you can specify your final wishes regarding funeral and burial, it is not normally found in a living trust.
- Pets: We can specify in your will that you leave your pets to a trusted caretaker, to whom you can leave money.
One other tip when drafting either a will or living trust is to separately document passwords for all your online accounts. This gives trustees or your executor access to all the necessary information. This information is not normally found in your living trust or will, especially as a will becomes a public document upon your death. The last thing your family needs is to deal with someone hacking into your accounts and depleting all your bank funds.
Learn More About Our Services
The team at Arizona Statewide Paralegal serves all counties in Arizona and we are certified by the Arizona Supreme Court. We are paralegals who are trained at filing the appropriate paperwork and following the correct legal procedures. We have been helping customers like you with legal documents since 1992.
Retaining an attorney to prepare a will, living will, and/or living trust can be costly. Why spend thousands of dollars in attorney fees for simply preparing legal documents, when you can have the same services for much less? From document preparation, filing and serving, to providing notice to tracking deadlines, we can do it all without any hassles. We also offer in-person consultations for those who desire the ultimate in customer service.
You will find many legal services listed online that will prepare your paperwork for legal matters, but they do not offer any additional benefits. Once your documents are prepared, you are left to figure things out for yourself. In matters that require documents to be filed with the courts and served to the other party, you are left to handle them on your own. They do not help you with any other aspects of your case, either. If you have any questions about the process of document filing, you would have to pay for that assistance from another legal service.
Arizona Statewide Paralegal does not leave you confused and to fend for yourself with a mountain of paperwork. It is important to note that we are not licensed, practicing attorneys, which means we cannot legally engage in the practice of law. In other words, we can prepare the appropriate legal documents and guide you through the process itself, but we cannot give you legal advice. If you have legal questions on health care directives or probate law of a will, you will need to refer those questions to qualified probate and/or estate planning law attorney.
If you just need legal documentation prepared according to your direction and to ensure your wishes are followed, see how the team at Arizona Statewide Paralegal can help. We provide fast, friendly service, and offer convenience at a low price. Contact us to learn more about the documentation preparation services we offer for those who are in need of a living will and/or advanced care directive.