There is some confusion associated with the terms Living Will and Living Trust. Are they the same type of thing? Not at all. To help you avoid this confusion let me give you a short description of each.
A living will is a written instrument which expresses your desires in regard to medical attention. In the living will you state you intention not to be attached to or kept on artificial life prolonging measures or be given extreme medical procedures in the event that you are either terminally ill or when there is no prospect for your recovery from a serious illness.
Most people sign a living will when they want to avoid being kept alive by technology to maintain a vegetative state or to prolong the dying process. So a living will governs your health care or medical needs. It has nothing to do with your home, your possessions or your financial assets.

A living trust on the other hand, has nothing to do with your health care or medical needs. It has everything to do with your home, your possessions, and your financial assets.
A living trust is a written document which governs how your home, your possessions, and your financial assets will be managed during your lifetime. And it describes how your several assets will be used or distributed in the event or your incapacity or upon your death.
Because your home, your possessions, and your financial assets will be titled in your trust’s name, there will be nothing in your name to require court interference should you die or become incapable of managing your own affairs.
The trust has three parties. The Settlor (or Grantor) is the person setting up the trust. The trustee is the manager of all the trust assets. The beneficiary is the person or persons who have the benefits of the trust assets while they are in trust.
If you set up a trust for yourself, you can be all three parties. You will be the Settlor, you may still manage the trust assets as the trustee. And you can be the lifetime beneficiary.
Your written trust agreement also names someone to replace you if you can no longer act as trustee. This person is called a successor trustee. You are the lifetime beneficiary, but you name others to become beneficiaries upon your death. The trust avoids a probate at the time of your death because there is nothing in your name. It’s all in your trust. The terms of the written trust agreement specify how your estate will be distributed.
For the same reason, your trust also avoids the need for a court conservator to be appointed in the event of your incapacity. The terms of your trust will govern in all matters consistent with its terms and without judicial interference.
Just think, all your instructions can be followed without the need for judges, lawyers, and nosey relatives. Don’t you think you should have a living trust? And also a living will?

BEWARE OF THE INVISIBLE LINE IN THE BANK

You mean you didn’t know there was an invisible line in your bank? That’s because it is invisible after all. No one will dare to point it out to you. “Then why is this important at all,” you may ask. Because what you don’t know may come back to bite you.

I’ll give you an example. One day a client of mine, Mrs. Prudent (the name has been changed to protect the gullible), went into her bank to deposit a check. It was a check for a large sum of money.

Mrs. Prudent had sold her small, home-based business. She wanted to fully retire and take things easy. She was eighty-two. She intended to open a certificate of deposit.

A CD, she knew, is insured by the Federal Deposit Insurance Corporation up to $250,000. This was the amount of her deposit. She felt good, she knew her money would be safe.

That was when the teller told her she must see the investment advisor at the bank. He would help her with her deposit.

The investment advisor was very pleasant and cordial. He certainly looked and talked like he knew what was best. He said that the bank now had an account for her that would pay more that the existing rate for a jumbo CD. This account would also grow faster than her deposit could.

Mrs. Prudent was absorbed in the banker’s explanation. She felt like she was in good hands. It was her bank after all.

When all the soothing talk from the bank investment advisor was finished, Mrs. Prudent left her money in his hands. He gave her a paper that looked like an official investment document. It didn’t look quite like her previous CD’s. But she was comfortable. She had dealt with this bank for years.

What Mrs. Prudent didn’t realize was that she had crossed the invisible line in the bank.

You see, banks can now offer financial products which are in no way associated with the bank. They are now in the investment business. The banks investment officers get paid a little differently than the bank employees. They may make commissions on the sale of other investment products.

The transactions on one side of the invisible line in the bank are insured by
the Federal Deposit Insurance Corporation. They are bank products.

On the other side of that invisible line, the banks investment officers may place your money in investments, insurance, and annuities which aren’t the products of the bank at all.
These products are not insured by the Federal Deposit Insurance Corporation. They bear the risk of other types of investments. They may fluctuate with the stock market.

This is fine, if you know that’s what you are getting. But it does come as a surprise to many.

Some time later, Mrs. Prudent came to see me about updating her medical power of attorney. While she was talking with me, she mentioned that it seemed odd that her bank CD seemed to lose some of its value.

“What do you mean,” I asked.

She produced a copy of a statement which showed that the value of her “CD” was now less than the $100,000 she had originally deposited with the bank.

After a review of the statement, I explained that the “CD” was not a CD at all. It was a variable annuity issued by a large insurance company, and it was based on the performance of the stocks held within the annuity.

“What do you mean,” she asked. “I opened this account at my bank.”

“ Yes,” I explained, “but it was issued on the financial advisor’s side of the invisible line at the bank. It was not a bank product at all, much less a CD.”

The account had lost value because the stocks which were held in her variable annuity had lost value in the stock market.

“I don’t invest in the stock market,” she argued.

“Oh, but you do,” I responded. What you ended up with at the bank was not a CD. As I explained, it was a variable annuity.

A variable annuity is a product which varies (hence variable) according to the stocks held by the insurance product, the annuity. You were not dealing with the bank, you were dealing with the investment advisor who happened to be at the bank. You crossed the invisible line.

Mrs. Prudent was flustered. “This isn’t what I wanted,” she shrieked. “I just wanted my money to be safe and earn a fixed percent. I wanted a CD!”

I had to agree. Mrs. Prudent had no business investing in the stock market. Or in a variable annuity, which is nearly the same thing.

At her age there would not be enough time to recover any loss in the value of her investments. Safety had become more important than growth, or even the potential for growth.

If the annuity Mrs. Prudent had invested in were a fixed annuity then everything would be all right.

With a fixed annuity there is no threat of losing the principal. All principal is guaranteed. Some states have even passed laws securing the funds held in a fixed annuity. It is safe from lawsuits and creditors. So all in all, a fixed annuity is not a bad investment.

And a fixed annuity would most likely have paid more interest than the banks certificate of deposit. And it would have been as sure and protected as the banks certificate of deposit.

But that is not what the bank investment advisor wanted to sell her. You see a variable annuity generally pays a larger commission to the bank financial advisor than would a fixed annuity.

We went to the bank together. When I objected to the way Mrs. Prudent was sold a variable annuity when she wanted a CD, the bank disagreed.

When I explained that Mrs. Prudent was eighty-two and had no business being in the market, the bank disagreed.

When I asked if Mrs. Prudent’s funds could be returned and placed in a safe account, the bank said no. The bank generally refused Mrs. Prudent’s requests.

Their position was that Mrs. Prudent should have known about the invisible line in the bank, that is the difference between banking activities, and investment propositions.

The best notion it seems to me, is to let banks do your banking, and let investment advisors advise you about investments. Insurance representatives would be the ones to talk to about insurance. And annuity promoters would be most helpful when considering annuities.

In any event, see your estate planning attorney before completing any such changes. You would be wise to make sure whatever you do coincides with your estate plan. You don’t want to undo any of your careful planning. There is an invisible line.

Do you know where the invisible line is in your bank?

Everyone knows how important it is to be able to make decisions regarding your health care. But what happens if you are unable to make your own health care decisions? Can someone else make them for you?

Yes, but only if you have appointed someone to be your health care agent or issued a health care power of attorney. Together with this appointment you should also specify your wishes by writing out some “Health Care Directives.”

The National Academy of Elder Law Attorneys has issued this following news bulletin to remind people to name their health care agent in writing:

News
1. National Health Care Decisions Day is April 16
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Despite recent gains in public awareness of the need for advance care planning, studies indicate that most Americans have not exercised their right to make decisions about their healthcare in the event that they cannot speak for themselves. The National Healthcare Decisions Day event will help Americans understand that making future healthcare decisions includes much more than deciding what care they would or would not want; it starts with expressing preferences, clarifying values, identifying care preferences and selecting an agent to express healthcare decisions if patients are unable to speak for themselves. The National Healthcare Decisions Day (NHDD) initiative is a collaborative effort of national, state and community organizations committed to ensuring that all adults with decision-making capacity in the United States have the information and opportunity to communicate and document their healthcare decisions.

If you haven’t yet done so, decide you will now put your Health Care Power of Attorney and Health Care Directives in place. Don’t delay-do it today.

Why your life may not depend on either of these documents, your death does. To find out how these two important documents can save you after death, read more >>

 Living Trusts and Living Wills are not the Same Thing: Download