Living Trust or Will: What's Right for Your Elderly Loved One?

If you're in a position where you have to make or aid in financial decisions for an elderly loved one, then you may have recognized the need for a document (or documents) to decide the disposition of their assets upon the time of their death. If your elderly loved one has not already taken the task upon themselves, the need for such a document should not be underestimated, and the task of putting one together should not be put off.

There can be serious financial consequences for their estate if there is no document in place to determine the disposition of assets. Your elderly loved one has presumably worked hard for what they have and would prefer to decide for themselves what happens to what they leave behind. Even if it seems as if they have little to nothing left to their name, there is potential for difficulties in the distribution of whatever assets they do have if no estate plan is put in place.

However, estate planning can be time consuming, confusing, and costly. To get started, you will first want to understand the key differences between the two primary types of estate plans, the living trust and the traditional will, as well as the role of a living will.

What Is a Will?

A will is a simple written document, signed by your elderly loved one and witnessed, that provides instructions on the distribution of assets upon the time of their death. It provides for a single distribution of assets that may be contested in court, and allows for the appointing of guardians for any minor children your loved one may be responsible for. Wills are considerably less expensive to draw up and make official, though they can be contested, and they do not allow for management and nuanced distribution of assets over time.

The Shortcomings of a Will

Wills have basic shortcomings. If they have any imprecise language or lack in terrorem clauses (which threaten heirs who challenge them with disinheritance), they can invite lawsuits and other battles. If the author of a will is elderly, a spouse, ex-spouse or children could try to assert that the author had insufficient mental capacity at the time of authorship or wrote the will under undue influence.

Wills are made public; they are probated. While there are many non-probate assets that pass directly to a designated beneficiary or a joint tenant (jointly held bank accounts with right of survivorship, jointly titled real property, POD accounts, most types of IRAs and workplace retirement accounts), other assets do not. The length of the probate process varies by state. It takes weeks in some states, months in others.

Probate requires money as well as time: even if you have named the most capable executor around, the court costs and lawyer and appraiser fees involved may still eat up as much as 5% of your estate (if you're a millionaire, that's $50,000). Mostly, those fees go for basic clerical work. If your estate planning goes no further than a will, you could be inviting a dispute, and things may not turn out quite the way you want.

What Is a Living Trust?

A living trust is a document (or collection of documents) that provides instructions for the disposition of a person's assets during the remainder of their life, should they become incapacitated, and in the event of their death. Typically they are set up with a trustee, which could be you or your elderly loved one, depending on their capacity, and have successor trustees set up to manage the trust once your elderly loved one has passed.

Living trusts are typically set up to manage finances and property in the event of the death or incapacitation of the trust holder, and they allow for ongoing management over the course of time set in the trust. A living trust requires no court intervention and can be a terrific instrument to help avoid the inconvenience, public nature, and expense of a court-supervised distribution of an estate. Living trusts are more expensive to set up initially than a will, and require management, but they also allow for more nuanced distribution of assets.

How a Revocable Trust Avoids Probate

More people should consider a revocable trust. Assets within a revocable trust can avoid probate (assuming they have been properly transferred into the trust, of course). Upon the death of the grantor who established the trust, the grantor's appointed trustee distributes the assets within the trust per the grantor's wishes, with no probate involved. The chance of a family fight over inherited assets lessens. While creating a revocable trust can cost ten times as much as creating a simple will, it may be worth every penny in the end.

Living Wills and Health Care Proxies

A living will is a different document from a will or a trust, and it can prove quite valuable. You may not die suddenly, and you could be incapacitated for a period just prior to your death. Should that be the case, a living will (also called an advance directive) can articulate how you want to be treated.

Additionally, a health care proxy document can appoint someone (known legally as a health care agent) to authorize doctors and nurses to carry out those directions. A health care proxy is also crucial in instances when a younger individual becomes severely disabled.

Key Points of Difference and the Takeaway

A living trust is by nature more flexible and allows for managed distribution of assets over time. Additionally, a living trust can help to keep your affairs and the affairs of your family out of court and out of the papers. However, a living trust is more expensive to enact and requires maintenance from its enactment through its conclusion.

If your elderly loved one's estate can be managed and distributed simply (in other words, if there is little property and assets to be distributed), then drawing up a will can suffice. If, however, there are multiple properties and assets, an abiding need for privacy and to keep the estate out of the courts, or the need to distribute property and assets over time to heirs who are currently minors, then a living trust may be the best choice.

Opt for more control. When you pass away, your money will have only three possible destinations: percentages of it will go either to your heirs, to charity, or to the government. Either way, estate planning should not be put off.

Helpful Resources

• Long term care planning with our friends at ACL
• How Oregon defines activities of daily living (ADLs) for long term care
• Find Care Facilities for Your Loved One
• Senior living near me: adult home placement
• Explore residential care homes for the elderly

Finding a Place for Mom or Dad

Estate planning is often part of a larger conversation about where and how an elderly loved one will live. Community living and finding the right living choice for you or your loved one is important, and Golden Placements has ideas gathered over years of experience as senior life specialists. We help you navigate the details.

Golden Placements helps you manage resources and takes care of the leg work for finding the best living situation for Mom or Dad, at no cost to your family. Call us at 503-723-7145 or contact us to learn more.