Living will vs. living trust: What’s the difference?

Despite their similar names, living wills and living trusts serve two fundamentally different purposes in estate planning.

First, let’s distinguish a “living will” from a last will and testament. A living will is a document that lets you provide instructions for your medical care preferences in case you’re ever unable to communicate them. A living will shouldn’t be confused with a last will and testament, which — like a revocable living trust — you use to explain how your assets should be distributed after you pass away.

A revocable living trust is a legal arrangement that lets you decide how your assets are managed and distributed, both during your lifetime and after you die. While both a last will and testament and a revocable living trust can be used to transfer property after you pass away, they work in different ways and offer different benefits.

It’s important to understand the differences between these documents because each one plays a unique role in protecting both your medical wishes and your financial legacy.

Trying to create your estate plan? Learn about the difference between a last will and a living trust to determine which one is right for you.

What is a living will?

Despite its name, a living will isn’t actually a will at all. (Confusing, we know!)

Instead, a living will is a legal document that lets you outline your healthcare preferences in case you’re ever incapacitated and unable to communicate them. For example, your living will would go into effect if you were in a coma, unconscious, or cognitively impaired due to a brain injury.

Living wills — also known as medical or healthcare directives — are part of an Advance Healthcare Directive (AHCD). An AHCD is a comprehensive medical document that includes two key components:

• Living Will: This is where you specify your healthcare wishes.
• Medical Power of Attorney: This appoints a healthcare agent who is responsible for making sure your medical wishes are carried out.

A living will or AHCD only takes effect when you’re alive but unable to communicate. During this time, the agent you named in your AHCD will instruct your health care providers according to your wishes. Your agent loses their legal authority as soon as you’re able to communicate again — for example, if you wake up from a coma, you resume making your own medical decisions.

Want more information? Learn more about living wills or create your own living will for free using FreeWill.

What is a revocable living trust?

A revocable living trust is a legal arrangement that lets you decide how your assets are managed and distributed, both during your lifetime and after you die. Think of it as creating a container that “owns” your property, including your home, bank accounts, and investments.

Once you create a revocable living trust, you must fund it by transferring all of your assets into the trust. This can include re-deeding your property and re-titling bank and investment accounts, among other things.

When you create a revocable living trust, you typically serve as both the trustee and the initial current beneficiary — meaning you maintain control of the assets during your lifetime. You also name a successor trustee, who’s responsible for managing and distributing the property in your trust according to your wishes after you pass away. You’ll also choose beneficiaries who will get your property after your death.

Because a revocable living trust indicates who will get your property after you die, it serves a similar purpose to a last will and testament. But they accomplish these goals in different ways, and each has its own benefits and drawbacks.

What is a last will and testament?

A last will and testament is a legal document you can use to outline your wishes for your property after you pass away. In your will, you can also name guardians for your children and pets, as well as an executor to manage and distribute your property according to the wishes you outlined in your will.

A last will and testament and a revocable living trust perform similar functions, but they have a few key differences:

• Timing: A revocable living trust takes effect as soon as you fund it, while a last will and testament takes effect only after you pass away. Funding a revocable living trust involves transferring all of your assets into the trust.
• Probate: A last will and testament must go through a court-supervised process called probate, while a revocable living trust is not subject to any court supervision (it skips the probate process).
• Privacy: A last will and testament becomes public record during the probate process, while a revocable living trust generally remains private.
• Maintenance: Since you must transfer new property into a revocable living trust as you acquire it, it requires more ongoing maintenance than a will.

Living will vs. living trust: Which one should you choose?

To recap:

• Despite their similar names, a living will and a revocable living trust are distinct estate planning documents that serve very different purposes.
• A living will is a legal document that lets you outline your healthcare preferences in case you’re unable to communicate them. It’s one component of a more comprehensive document called an Advance Healthcare Directive (AHCD).
• The term “living will” is often mistakenly used to refer to a last will and testament, which is a legal document that specifies how your property should be distributed after you pass away.
• A revocable living trust is a legal arrangement that specifies how your property is managed and distributed during your lifetime and after you pass away. It serves a similar purpose to a last will and testament.

An Advance Health Care Directive (which includes a living will) is an important part of any estate plan. So is a revocable living trust or last will and testament — but you typically only need one or the other as your main estate distribution document. Learn more about last wills and testaments vs. revocable living trusts to decide which is the right option for you.

Additional reading:

• Living trust vs. will: What’s the difference?
• What are living wills?
• How to make a will in 10 steps