There are a lot of types of wills out there and it can be intimidating to enter this playground not knowing what to do with. Understanding the different kinds of wills doesn’t have to be confusing. We’ll break them down so you can make an informed decision and create one that’s right for you. And it doesn’t have to be a painful experience—or an expensive one, either.
Even though the names are similar, a living will is not a last will and testament. A living will is a document that explains your wishes for your end-of-life medical care if you can’t speak for yourself.
It lets you maintain control of your life and future even if you’re seriously injured or become terminally ill. Since your wishes are written down, your family doesn’t have to make a gut-wrenching decision about your care if something unfortunate happens to you.
Every state handles living wills differently, so make sure yours is done to match your state’s requirements. And even though your wishes are clearly stated in a living will, make it a point to communicate those wishes to family, friends and loved ones so there’s no confusion.
A joint will is a document created by two people who leave their stuff to each other. Think husband and wife. In it, the couple agrees that when one spouse dies, the other inherits the whole estate.
When the surviving spouse dies, their stuff goes to someone the couple named together. It’s a single document two people sign. A mutual will does the same thing, only it involves two wills that both spouses sign.
Joint wills were popular back in the day when wills were written or typed (like on a typewriter). It saved time and money.
But now, they can be a big headache. That’s because the surviving spouse can’t change a joint will even after the death of their spouse. So if a surviving spouse remarries and has a stepchild, they can’t leave anything in the joint will to that stepchild.
The same problem applies to mutual wills. If you and your spouse use either of these wills, your family will likely end up in Headache City.
A better option is a mirror will. Also called a reciprocal will, this option includes two wills that are drafted almost identically, but they have different names as testators (the people making the will) and are signed individually.
Often, mirror wills state that the surviving spouse inherits the estate and cares for the kids, but other details may be different. That’s why it’s important to get with a financial advisor so you can make sure all your bases are covered within the will.
Because mirror wills are actually two different wills, part of the estate can go to someone besides the surviving spouse. So you can leave the antique family brooch to your sister or cousin, and leave the rest of your stuff to your spouse.
The other advantage of a mirror will is the ability to change it. This can be important if you remarry or go through a divorce. That flexibility is one of the reasons financial experts like Dave Ramsey recommend mirror wills.
Nope, a holographic will wasn’t invented at a sci-fi convention. It’s a last will and testament that is written and signed by hand. Believe it or not, these wills are still around. People in life-threatening situations (a soldier in a combat zone, for example) may write one if they think they might not survive.
But not all states accept holographic wills as valid, so if you have one, make sure it’s accepted where you live. That’s one of the problems with handwritten wills. With today’s technology, it’s a whole lot easier to create a will online and save your family the possible heartache and frustration.
A living trust doesn’t count as a type of will, but since they’re often created as people are drawing up their last wills, you might have heard about them.
A living trust is a legal document that transfers ownership of your assets to the trust, so it actually owns your stuff even though you’re still alive. It also spells out how to distribute your stuff after you pass away.
Nothing in a living trust has to deal with probate costs though, which is a plus. And since it’s technically a private document, a living trust gives you a measure of privacy that wills can’t give you.
Living trusts come in two flavors: revocable trusts and irrevocable trusts. You can’t change an irrevocable trust, hence the name. There are benefits and drawback to both kinds, so make sure you know the differences between revocable and irrevocable trusts.
A testamentary trust is a trust that’s written inside a will. It’s also called a will trust or a trust under will. Creative names, right?
A testamentary trust distributes all or part of your estate (your stuff) after you die, but the trust is not created until after you die. It’s different than a living trust, which is created while you’re still alive. You can create more than one testamentary trust within your will.
A will trust is often used when you want to provide for a disabled relative or a minor, or if you want someone to receive their inheritance at a later time. Typically, the assets (money, jewelry, land, etc.) within a trust are held until a specific time—like a person’s 25th birthday or after their college graduation.
Since the testamentary trust is inside a will, it has to go through probate after you pass away.
And until the person (or people) named in the trust receives their inheritance, the trustee (person who carries out the trust) has to go to probate court every year to prove they are taking care of your stuff as instructed and aren’t using it for personal gain. Those probate costs could add up over the years.
A simple will is a basic will without any fancy clauses or stipulations. Despite its name, you can do a lot with a simple will. You can declare how you want your stuff given away and who gets it.
You can also choose the person (called a personal representative or executor) who will make sure your will is carried out and name a guardian for your kids if something happens to you. And you can even name the person you want to care for your favorite ferret. A simple will can cover a lot of ground.
Which Type of Will Is Right for You?
The kind of will you choose depends on a lot of factors, including how much money you have, whether or not you own a business, and if you have property that’s stayed in your family for multiple generations. With all the different kinds of wills out there, you can find the right one for your situation.
Fortunately, you don’t have to go to a lawyer’s office or spend a fortune to have your will created. You can create your own will online in less than 20 minutes! All you have to do is plug in your information, and the rest is done for you.
Creating a will is one of the most important and most loving things you can do for your family. And now, since you know their different features, you can get your will done and mark it off your list!