You must decide between using a Living Trust and a Will as your main document when you prepare your estate plan. Many people are confused by the differences.
When you use a Will for your main estate planning document your personal representative (sometimes called an executor) will use the probate system to transfer your solely owned property at your death. The Will does not become effective until you die, so it does not allow your personal representative to handle your assets if you become incapacitated. You must use a Durable Power of Attorney to appoint someone to handle your affairs while you are still alive.
A Will might not apply to all of your property. For example, if you hold title to an asset with another person or persons the asset will go to that person upon your death regardless of what your Will provides. Assets that have beneficiary designations, like life insurance and pensions go to the beneficiary listed, not according to your Will.
When you use a Living Trust as your main estate planning document, you act as trustee of your own trust. All of your assets should be transferred to the trust when you set it up. You must then continue to take ownership of assets in the name of your trust as you acquire them throughout your life. Usually your insurance policies are made payable to the trust. For tax reasons, IRAs are often left payable to the surviving spouse or another individual first and the trust is listed as a contingent beneficiary. You also provide in your trust for another trustee to step in and manage your assets if you become unable to do so during your life.
Whether you use a Living Trust or a Will, you will also need to execute a Health Care Power of Attorney, a Living Will and a HIPAA release form in order to avoid the need for court involvement at your incapacity.