Living Trust vs Power of Attorney - Key Differences
There are many different legal terms associated with managing your assets throughout your life, and they can get confusing if you do not know what they mean. While legal jargon can be a bit overwhelming, it is important for you to learn the difference between things like living trusts and the power of attorney so your estate management plans are secure. To learn more about living trusts, a power of attorney, and ’s revocable living trust product, keep reading below.
What’s a Living Trust?
You might have heard of trusts before and you might think that they are only for the super-rich. But a trust can be a great way for anyone to make sure their estate is handled in a responsible way throughout and after their life. A living trust, also referred to as a revocable trust, is a legal method to manage your assets. A living trust can cover all stages of life - while you are alive, dead, or incapacitated. By placing your assets into a living trust, you can ensure that they are managed according to your instructions by your trustee, who can be either a third party or yourself. Your revocable living trust can help you:
- Dictate how your estate is managed
- Name trustees and beneficiaries
- Help your beneficiaries avoid future fees and probate
To learn more about living trusts and other legal preparations for your estate after your passing, keep reading.
What Is the Difference Between a Living Trust and Power of Attorney?
A living trust is a good way to manage your estate, but before taking any legal action, it is important to know exactly what a power of attorney and living trust mean. While you have read about living trusts above, the power of attorney entails a different legal process.
Power of attorney is a way to give someone the legal authority to act on your behalf. This can be in one designated area of your life or in many areas more generally. This designated person acting on your behalf, often called your agent, can act for you in whatever way is permitted according to your agreement. With a living trust, you do not give your trustee power of attorney, but rather allow them to handle the management of the assets within your trust according to your guidelines. You can also name yourself as your own trustee, handling your own assets.
Revocable and Irrevocable Trusts
Revocable living trusts are not the only kind of trusts that you are able to create. There are two major types of trusts that are commonly used to manage assets, called:
- Revocable living trusts
- Irrevocable trusts
While both types of trusts manage your estate, they have some key differences. The most important difference between revocable living trusts and irrevocable trusts is the ability to make changes to them. Revocable living trusts can be changed and edited easily any time after you first create them. Whether you are adjusting how your assets are managed, removing or adding beneficiaries, or changing your trustee - all are possible with revocable living trusts. On the other hand,it is very hard to change anything about your irrevocable trust and adjust how your assets are handled. Because of this, making a living trust makes your estate management much more flexible. Read more about revocable and irrevocable trusts here.
Difference Between Living Trusts and Wills
When you think of legal ways to prepare for your death, most people usually think of a will. While a will is a common way to manage your estate after your passing, a living trust can help you in some ways a will can’t. The table below can help you understand the difference between a will and a living trust:
| Living Trust | Will |
| Active while you are alive, even if you are alive and incapacitated, as well as after your death | Only goes into effect after your passing |
| No need for any probate | Must go through probate |
| Keeps your documents and information private | Publishes your documents and information as public record |
| Helps your beneficiaries avoid future costs | Can create costs for your beneficiaries in the future |
| Helps your beneficiaries avoid disputes | Possible disputes in court |
If you make a living trust, you can still make a will as well to make sure your assets and property are taken care of after your death. But, a will can only be active after your passing, while a living trust can cover all stages of life. Read more about the difference between living trusts and wills here.
Get a Revocable Living Trust Instantly
Making your living trust with is a quick and stress-free process that can save you a lot of time and money. To generate a living trust with DoNotPay, all you have to do is:
- Open and search for the Revocable Living Trust product
- Answer some of our questions about your assets, beneficiaries, and trustee
- Tell us where you will be notarizing the document
To learn more about how DoNotPay can help you with your living trust, click the articles below.
- Living Trust Costs
- Living Trust Forms
- How to Set Up Your Living Trust
- Joint Revocable Trusts
- Revocable Trust Taxes
- Does a Revocable Trust Become Irrevocable Upon Death?
Learn More About Living Trusts in Your State
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