What are the Different
Types of Wills?
hen I first got my Texas Life Insurance license, I was amazed by the number of clients who never spoke to their loved ones about two of the most important financial topics: life insurance & wills.
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What Is a Will?
A will is a legal document making your wishes and desires known to others. It informs those who handle your belongings and resources upon your death what to do with your assets, affairs, and other things you may care about, such as property, pets, children, money, and perhaps, your favorite baseball card collection.
Types of Wills
To make the topic even more confusing, there are several types of wills. Don't worry. We like to keep things simple at DollarOtter.com.
There are basically 4 Types of Wills:
1. Simple Wills
Usually, the most common and most natural, a Simple Will applies only to you if it is your will. Sometimes it is just referred to as "Simple." However, it is essential to recognize that it is not a joint will for you and your spouse.
A Simple Will is created and signed, identifying what needs to be distributed and to who. For example, you want the clothes in your closet to go to your sister, the coffee pot to your mother, and appliances to your cousin; then, a Simple Will may be for you.
It is called a Simple Will because it is relatively straight forward with minimal outside influences. When creating a Simple Will, it is highly recommended it be typed, not handwritten, to avoid any confusion ensuring the message is clear and legible.
The general elements in your will should contain the names, addresses, marital status, and proper instructions as to which belongings go to which beneficiaries.
Next, you should appoint someone to be the executor of the Simple Will as this person will be legally responsible for ensuring your instructions are followed.
After you have completed this, it needs to be signed by you and a witness as well as adequately dated.
Something to consider, as life events occur, your marital status may change from single to married or vice versa in the event of a divorce. This is an opportunity to change your will to ensure it is up-to-date, and this will ensure your property is protected.
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2. Joint Will
According to FreeAdvice Legal, "a Joint Will is one that two people make together, each leaving all of their property and assets to the other. It also stipulates what will happen with the assets when the second person dies."
Typically a married couple will create a Joint Will protecting the other's interest should he or she pass away. It is designed to prevent the other person who survived from making changes to the will.
For example, should a couple travel to Cabo for their 10th wedding anniversary, and before them going on vacation, they have a Joint Will created. On the way to Cabo, a horrible flight accident occurs, causing the husband to pass away, leaving the surviving wife.
Fast forward three years, and she remarries. The wife is stuck with the will as written or gets a lawyer to jump through legal hoops.
In a Joint Will, it must include "instructions for what happens to the property and assets when the second individual dies. In essence, the two individuals are forming a contract together. In order for the contract or will to become revoked, it is necessary for both individuals to agree to it." according to LastWillandTestament.
3. Testamentary Trust Wills
A testamentary trust is a provision in a will that appoints a trustee to manage the assets of the deceased.
It is created in a last will and testament and is commonly used as a method to reduce estate tax liabilities. As a type of trust, the terms are clearly specified in the will.
A Testamentary Trust only takes effect after the settlor [person who created the trust] dies. SmartAsset explains that "a testamentary trust allows the creator to stipulate how the assets contained in the trust will be disbursed. People often use testamentary trusts if they want to be able to specify when they leave their assets to a beneficiary."
When it comes to this type of trust, there are three parties:
Person creating the trust to transfer his or her assets
Trustee, the person handling the trust and assets until the beneficiary takes claim
Beneficiary, the person of transfer to handle the assets (common if the beneficiary is a minor)
Pros and Cons of a Testamentary Trust
If you have young children or grandchildren, and you have assets to disburse, a Testamentary Trust is ideal because it protects those assets until the child is of legal age to become financially responsible.
While Testamentary Trusts are affordable with low upfront costs, anticipate high probate fees when meeting with the court. This is an annual meeting that is conducted until the beneficiary receives the assets. The younger the recipient, the longer you'll pay these court fees.
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4. Living Wills
Do you know what a living will is? According to Oxford Dictionaries, a living will is "a written statement detailing a person's desires regarding their medical treatment in circumstances in which they are no longer able to express informed consent, especially an advance directive."
A living will is sometimes referred to as a Healthcare Directive or Advance Directive.
It is a legal document communicating one's wishes for end-of-life medical care. It can be used to leave property to another in the event of a death.
Because living wills will vary from state-to-state, many households will hire a lawyer to help them prepare. This doesn't mean you have to hire a lawyer as one can make a living will at little cost.
With Quicken WillMaker & Trust 2020 Book & Software Kit, the software guides you from start to finish in creating a will for you and your family.
Source: Wix Photo Gallery
What If I Don't Have a Will?
Have you ever heard of the term "intestate"? It is a term often used in the legal realm for having no valid will or nothing disposed of by will. If you pass away without leaving a will, the State distributes your property, assets, etc. as they see fit.
If you're single when you pass, the entire estate will belong to the State. If you're married and pass away without a will, then the laws of intestate succession may be a factor.
Depending on the State, your property may be distributed in split shares amount your surviving family members. Remember that pesky Uncle or Cousin Eddie; he may inherit some of your property.
However, if you live in a community/marital property State, your surviving spouse or siblings may receive it. It depends on the State laws.
In a Forbes article, "community property states such as Texas, your surviving spouse will only inherit all your community property if all your children are also the children of that spouse. Otherwise, your one-half interest in your community estate will pass to your children. If there is any kind of animosity or resentment, they can conceivably force her to sell the house and boot her to the curb, because they own half the house."
Source: Wix Photo Gallery
Why Do I Need a Will?
There is a saying that if you want to see your family's true colors, wait for a funeral. When it comes to money, property, and assets, this can quickly ignite a family feud.
Some will scream, "It's not fair," while others are only present to mourn.
If you have a family, a will is your legal document giving them guidance on how to handle your affairs from property to pets. Not having a will leaves the final decision up to the State, and they will decide how to keep the property.
Having a will ensures all of your property goes to where you want it to go. If you do not want the State to inherit it, it is recommended you create a will to avoid this possibility.
An even worst-case scenario is if you are caring for your elderly parents, and they are receiving government benefits.
Should you pass away, leaving them as the beneficiaries of your life insurance policy, depending on the amount of the payout, may jeopardize the government benefits.
This is because a large payout will be considered as income, and if the amount exceeds a certain threshold, they will lose those benefits. Having a will created that directs the lump sums to avoid crossing that limit would be a must-have option.
Source: Wix Photo Gallery
Do You Need a Will If You Have Nothing?
Everyone has something. While you may believe you have nothing, photos, automobiles, even junk in the yard has meaning to someone. If anything, create a will leaving the property for charity.
At What Age Should I Have a Will?
While most States consider the legal age of 18 as a required age for a will, it varies across several States. For example, in Georgia, you can create a will for someone that is 14 years of age. In Louisiana, the minimum age is 16.
Another factor that is to be considered is one's mental competence. Having mental competence is usually required to be considered legally binding. If someone's capability is being challenged, then one should consult with a doctor for an assessment.
Where Can I Get an Affordable Will?
You can protect your loved ones with a will by using LegalZoom. Their claim is "may people finish in 15 minutes" with pricing starting at $89.
If you are interested in learning more about Legal Wills, then you can affordably purchase Wills Made Easy, Legal Will Kit from Amazon for under $12. With over 147 pages of material and examples, this book delivers in-depth information about every type of will.
Did you know if you're a member of the Armed Forces or a dependent of a military member, you can obtain a will at no cost from your local base's Legal Office. Not only can you receive legal worksheets for free, but you can seek legal counsel to address family affairs, local laws, and even get powers of attorney.
So can you write your own will? As a matter of fact, most States recognize handwritten wills if signed by the testator, and these types of wills are sometimes referred to as holographic wills. However, be cautious of fill-in-the-blank wills that may be sold online. While these are low cost and can save you money, these types of wills are normally out of date and do not conform to many laws of the State.