There’s a great deal of confusion around the differences between Last Wills, Living Wills and Living Trusts. Let’s start with the Living Will, also known as the “Advance Medical Directive” or the “Right to Die” statement. The Living Will is a medical document that lays out your wishes in advance with respect to your End of Life care. The Living Will states whether you or don’t want your life to be prolonged with life sustaining treatment in a way that serves only to artificially delay the moment of your death. Quite an important decision!
The Living Will also addresses your wishes around artificial feeding and hydration, and the use of drugs, electric shock and artificial breathing to keep you alive if you’re terminal or in an irreversible coma or a persistent vegetative state. You may remember Terry Schiavo, who was in a vegetative state for more than 10 years because she had no Living Will. Her husband and her parents fought in court – in front of a national audience – over removing her from life support. “Living Will Parties” became the rage for a short while after the Courts granted her husband the power to ‘pull the plug’ despite her parents’ objections. Her parents wanted to keep her alive indefinitely, on life support!
Arizona’s Living Will allows pregnant women to state if they want life sustaining treatment withheld or withdrawn if it’s possible that the embryo or fetus could be brought to live birth with the continued application of life sustaining treatment. So, as you can see, the Living Will is very different from the Last Will and Testament!
By comparison, a Last will and Testament is used to distribute assets that are stuck in your name when you die. Your wills and estates is nothing more than a note of your wishes to the Judge in Probate Court describing how you’d like your assets to be distributed. Here’s one way to look at it – your Will is a one-way ticket to Probate Court, a lawsuit that you file against yourself, using your own money, for the benefit of your creditors… or for the people who CLAIM you owe them money!
The probating of a Last Will is a public process in which anyone can see what you own – and what you owe. Nothing (other than a moral conscience) prevents someone from making a claim against your Probate estate. Ironically, Probate is designed for this very purpose – to hear claims and contests against your Will. The Probate Judge determines whether such claims and contests are rightful or frivolous. In the meantime, your family is pulling their hair out over the additional costs and delays the Probate process can easily require.
Assets valued above the “Probate Threshold”, which is established on a state-by-state basis, MUST be probated, whether you have a Will or not. That’s right! Many people wonder why Probate is needed if our written wishes are clearly established in the Will. Because your Will controls assets that are stuck in your name when you die, having a Judge supervise the process of dividing and distributing your personal Estate is a good thing. The alternative would be for your family, friends and neighbors to simply TAKE whatever assets and personal items they CLAIM you promised them… an out-of-control process that closely resembles theft!
So, in the end, Probate is a good thing if you die owning real property, financial assets and personal possessions property in your own name. Probate empowers your Personal Representative (the “Executor”) to transfer ownership of your assets to your intended beneficiaries under the Judge’s supervision. In some states, however, if you DON’T have a Will, your estate will be distributed according to the laws of “Intestate Succession”. This means that if you are married and you die
without a Will and you have children from a previous marriage, the estate will be divided 50% to the surviving Spouse and 50% among your children. Your plan and the State’s plan may be very different!
Finally, let’s talk about the Revocable Living Trust. A Living Trust is a Common Law contract we create by ourselves, with ourselves and for ourselves. In other words, we become all three parties to the contract – the Trust Creator (the “Grantor”), the Trust Manager (the “Trustee) and the owner of the lifetime economic benefits of the Trust (the “Beneficiary”). The Trust allows us to avoid Probate by automatically transferring control of the Trust assets upon our death or incapacity to our Successor Trustees. The Trust also spells out when and how our Trust assets are to be distributed to our Beneficiaries. A properly drafted Living Trust can avoid Probate for assets titled in the name of the Trust because the successor Trustee and the Beneficiaries are named in advance. One may also specify the age or ages beneficiaries must attain before gaining control over their share of Trust assets, along with a wide range of terms and conditions that control or restrict those distributions.
Because you establish these details in writing in advance of your death or incapacity, no Court involvement is required. Under a Will, a Probate Estate can take a year or more to settle completely. A Trustee may begin to settle the Trust Estate in as little as 10 days, or the time it takes to obtain a Death Certificate. With a Living Trust and Death Certificate in hand, your successor Trustee can begin the settling your Trust Estate quickly and easily, without the unnecessary delays and expenses required by Probate.
You may have been told that Probate is ‘quick and easy’ and takes very little time, money and effort to settle. But the truth is, when there’s money on the table, people’s greed often runs amok. Too often, we hear stories of children who exert undue influence over their aging parents, who appoint them as Personal Representative, then breach their fiduciary duties by keep their siblings in the dark about how the estate is being managed – or mis-managed. As time goes on, money disappears and suddenly, it’s too late. Beneficiaries who don’t have the financial resources to hire an Attorney to represent their interests are out of luck and can walk away empty-handed. Wills and estate planning are often contested, where everyone ‘lawyers up” (if they can afford to) and then the battles begin in what is essentially a public arena.
These common circumstances are why more and more people opt for creating Living Trusts. Well-drafted and properly implemented Trusts can help to mitigate contests, avoid the unnecessary expense and delays of Probate and protect assets for generations to come.
Warner Lewis III is the Founder and CEO of Life Planning, Inc., a nationwide provider of sophisticated, cost-effective legal solutions for individuals, families and business owners. Life Planning, Inc. is an Arizona Certified Legal Document Preparer (AZCLDP #80180 and 81386). For more information, go to www.lifeplanninginc.com or call (877) 438-7878 for a no-cost, no-obligation consultation.