A living will is a legal document that documents your wishes regarding life prolonging medical treatments. It is also called an advance directive or health care directive. Generally, a living will describes certain life prolonging treatments. You indicate which treatments you do or do not want applied to you in the event you either suffer from a terminal illness or are in a permanent vegetative state. A living will does not become effective unless you are incapacitated and unable to speak for yourself. Until then you’ll be able to say what treatments you do or don’t want.
A living will should not be confused with a living trust. A living trust is a vehicle for holding and distributing your assets to avoid probate. Assets held in a living trust do not avoid federal estate (inheritance) taxes, but they do bypass probate. Capital assets distributed by your will do not avoid probate. A living trust is often used in conjunction with your will to take maximum use of the federal estate tax unified credit to shelter your estate from federal estate taxes. If you have out of state investment property, a living trust can shelter that property from ancillary probate in the state where the property is located.
A complete estate planning package will also include a last will and testament, a health care power of attorney, and a general power of attorney.
You cannot designate guardians for minor children in a living trust. That has to be done in your will.
For situations where you are incapacitated and not able to speak for yourself, but your health is not so dire that your living will becomes effective, you should have a health care power of attorney or health care proxy. A health care power of attorney is a legal document that gives someone else the authority to make health care decisions for you in the event you are incapacitated. The person you designate to make health care decisions on your behalf is supposed to consider what you would want, so be sure to talk with them about it.
For example, you are in an auto accident and go into a coma. You are breathing on your own and have healthy brain function. You are not in a terminal state so your living will is not effective, but you are unable to make decisions about your medical treatment. Your health care power of attorney gives someone the power to speak for you.
A general power of attorney gives someone the legal authority to manage your financial affairs in the event that you become incapacitated. A health care power of attorney only governs your medical treatment. You need a general power of attorney to govern your business affairs. A general power of attorney is not in effect unless it is recorded in the county where you reside.
Most of these documents are state specific so consult an attorney who specializes in civil law and has an estate practice. As a general rule, you want the documents to be specific to your state of residence. If the documents are legally valid and enforceable for your state of residence, they are valid in all other states where you may own property or seek medical care.
Disclaimer – I am not a CPA, nor an attorney. The opinions expressed here are just that, opinions. They are intended to provide accurate information regarding the subject matter being discussed. Information shared is done so for educational purposes only and with the understanding that I am not engaged in rendering legal, tax, or other professional services. If legal, tax, or other expert assistance is required, the services of a competent professional should be sought.