Living Will Vs. Testamentary Trust

Living wills and testamentary trusts help you make difficult decisions.

In trying to prepare your family for the inevitable, there is a number of documents that you should have in place so that they, your doctors, and the government will know what to do when you become incapacitated or die. Two of these documents are living wills and testamentary trusts. Both of these can be very important, and they deal with different aspects of the final decisions that others need to make on your behalf.

Difficult Decisions

You must decide if, should you become incapacitated and dependent upon machines to prolong your life, you want your family to keep you alive as long as possible or let you go. This is a difficult question that people can deal with in their living wills. Such situations can cause strife among family members, and by having a clear statement of your wishes on the issue, you can alleviate a number of problems before they occur.

Proxies

As a part of your living will, you can designate a health-care power of attorney or health care proxy. This gives someone else the ability to make important health-related decisions for you should you become unable to do so.

Survivors

In legal jargon, close family members who live on after you--and are entitled to your estate--are called "survivors." In detailing the dispensing of their estates, many people are concerned with the prospect of possibly giving large sums of money to children or young people, for fear that they will waste or lose it. Testamentary trusts exist for this reason. As part of an individual's last will and testament, a testamentary trust can be used to dictate that certain amounts of money are dispensed to the beneficiary at specified intervals.

Living Trusts

Both of these documents are often confused with living trusts. A living trust is similar to a testamentary trust, except that you use it while you are still alive. Naming yourself as the trustee, you remain the owner of the trust until you die, at which time the ownership transfers to whomever you have named as the beneficiary.

Inform Your Family

Neither the living will nor the testamentary trust does any good unless the people close to you actually know about them. Keep these documents in a safe, accessible place, and inform the people close to you of their existence. If you designate a health-care proxy in your living will, make sure to speak with this person.

References

• CNN Money: What Is a Living Will?
• Uncle Fed's Tax Board: Testamentary Trusts
• State Bar of California: Do I Need a Living Trust?