There are a lot of different legal devices that are used in estate planning. People sometimes harbor misconceptions about them based on assumptions. We would like to shed some light on three common estate planning instruments here.
The most common estate planning device is the simple last will. This document is typically used to arrange for future asset transfers and to name a guardian for minor children. The thing that is less than ideal about this arrangement is that probate enters the picture when you transfer assets using a last will.
Probate is the legal process of estate administration that takes place under the auspices of the Surrogate’s Court. There is nothing inherently wrong with this process. However, from a purely practical perspective the heirs to the estate don’t receive their inheritances until this process has run its course.
There are ways to arrange for asset transfers outside of probate, and some people prefer this efficiency.
A living trust is a very commonly utilized probate avoidance tool. You convey assets into the trust and name a trustee who would manage the funds after your death along with a beneficiary or beneficiaries who would receive financial distributions.
These distributions would be made in accordance with your wishes as stated in the trust agreement. These transfers take place outside of the probate process.
This is where the confusion sometimes enters the picture. Some people hear about the things that a living trust accomplishes. They know that a simple will can be used to transfer assets, so they assume that living wills do the same.
In fact, a living will is an advance health care directive. With this document you state your preferences regarding whether or not you would want artificial life-support measures utilized to keep you alive in the event of your incapacitation.