Ultimate Guide to Wills and Why They Are Important

Name: Ultimate Guide to Wills and Why They Are Important
Item: Ultimate Guide to Wills and Why They Are Important
Author: Nathan Paulus

Writing a will is an essential part of end-of-life planning you should consider completing now.

Updated: July 23, 2024

Advertising & Editorial Disclosure

A will is a legal document that determines how properties and assets are distributed at the time of your death. Everyone can benefit from writing a will. It allows you to plan your legacy and protect the future of your loved ones.

Setting up a will is an integral part of end-of-life planning. However, it’s not a substitute for life insurance and other investment types. Learn the importance of a will, how it works, the steps involved and why it’s important to consider completing it sooner than later.

To Will or Not? American Will Statistics.png

Although 64% of American adults said estate planning is very or somewhat important, only 32% have a will.

When asked why they didn't have a will, 43% reported procrastination, 40% said they don’t have enough assets and 16% said they don't know how to get a will.

The percentage of American adults with a will varies across education levels: 54% of postgraduate degree holders, 43% of college degree holders, 29% of associate degree holders and 23% for those without continuing education.

Data shows that adults with higher annual income are more likely to have a will: 46% earn $80,000 or more, 35% are middle-income earners and 21% earn less than $40,000.

Sources:

Caring.com

How Do Wills Work?

Writing a will is a way to control the distribution of your properties to your chosen beneficiaries. Proper execution is necessary for legalities, including signing the will while you have the legal capacity to do so and having two witnesses sign the same document.

When talking about creating a will, people typically think of a last will and testament (simple will). However, there are various types depending on what you want to achieve, who it’s for and how it’s constructed. Below are some of the terminologies you’ll find across the different types of wills.

Title	Definition
Testator	The testator refers to the person making and executing the will. They sign their name on the document.
Executor	This is the person chosen by the testator to take charge of the distribution of assets/estate based on the will. They’re sometimes called personal representatives.
Beneficiary	A beneficiary is someone named to be a recipient of an inheritance, such as money or property.
Probate	Probate is the legal process involving the examination, approval and enactment of the terms included in a will. A court does this process.
Bequest	This is a provision in a will that leaves personal property that isn’t real estate to someone.
Codicil	A codicil is a change added to the will. It amends certain terms but retains the original terms of the will.
Intestate	If a person dies without setting up a will, they’re considered intestate. Laws on the distribution of the estate of a person intestate vary per state.
Heir	If an intestate dies, their property is divided among their heirs — typically their spouse and children.
Custodian/Guardian	If the person who inherited the property is a minor, the custodian named in the will has the legal responsibility to manage the property.
Issue	An issue is a direct descendant of the testator. This includes natural-born and adopted children and grandchildren.

From learning how to set up a will to choosing the best way to make a will, familiarizing yourself with these terms ensures you create a document that accurately reflects your wishes.

What Happens if You Die Intestate?

Dying intestate means passing away without making a will. If you die intestate, your state’s laws determine how to distribute your assets. They will typically go to your spouse or domestic partner if you have no children. If you have a child, your child and spouse will split your assets. If you have multiple children, one-third of your property goes to your spouse and your children will split the remainder. In most states, legal children refer to those born to the deceased or adopted by them.

If you don’t have a spouse or children, the state will generally give your assets to other relatives following the order of priority.

Grandchildren
Parents
Siblings
Nieces and nephews (if siblings are deceased)
Grandparents
Aunts and uncles (if grandparents are deceased)
Relatives of your deceased spouse

Your estate will go to the state if there are no living relatives.

What to Include in a Will

Creating a will ensures you control how to distribute your assets when you pass away. However, knowing what property you should include in the document is essential. You should also note the types of property you don’t have, especially those that will automatically be passed directly to your beneficiaries.

What Your Will Should and Should Not Include

What to Include

Property
Assets such as savings
Investments
Business ownership
Valuables, such as vehicles, jewelry, family heirlooms and art

What Not to Include

Pension and retirement accounts
Funeral wishes
Property placed in a trust
Property with a right of ownership or those owned as joint tenancy
Life insurance proceeds

Why Do You Need a Will?

There are various reasons someone would need a will. Without a will, you don’t control where your property will go after you die. Writing a will helps you protect loved ones. Contrary to what many people think, having a will isn’t only for the wealthy or those with complicated assets. Everyone can benefit from setting up a will.

Distribute estate

A will helps ensure the testator’s wishes are followed. You can also disinherit individuals you don’t want to inherit.

Decide who’ll manage your estate

You can appoint a personal representative to administer your estate when drafting your will. If you fail to do this, a court will likely appoint one.

Protect minor children

If you have minor children, you’d want to ensure they’re well protected. A will allows you to decide who’ll take care of them in the event of your death. A court will select a guardian if the deceased doesn’t appoint one.

Avoid legal issues

Creating a well-drafted will helps minimize delay in the probate process. It also prevents legal issues and challenges as it’s considered a binding document.

Make donations to the chosen charity

If you want specific charitable causes to receive donations from your estate, you can note them in your will. Additionally, gifts may help reduce estate tax as long as they’re within the set amounts.

Whether you're exploring how to set up a will for the first time or looking to update an existing one, learning the will writing process ensures that your assets are distributed according to your wishes, your loved ones are cared for and your legacy is preserved as you envision.

When to Create a Will

Many people put off writing a will. They do so for a variety of reasons, some being they think it’s too complicated, don’t know where to start or are young and think it’s not relevant. However, certain circumstances necessitate creating a will.

Married couples

While the deceased's spouse typically inherits their estate, it still helps to have a will. Setting up a will ensures they receive the property and assets you want. It also allows you to name other individuals for whom you want to receive an inheritance.

Parents with kids

If you want to ensure that your kids inherit certain assets and property, it’s best to set up a will. If you have minor children, a will also help you appoint a guardian in the event of your death.

People with positive net worth

If you have a significant net worth, you’d likely need to make a will to facilitate the distribution of your assets. Otherwise, the state will determine who’ll inherit your estate.

A single person with no children

Even if you don’t have children and are single, you can still benefit from having a will. This ensures your estate goes to someone you want. It also reduces the problems your loved ones will handle after your death.

A woman is ensuring all steps are completed.

Steps to Writing a Will

Preparing a will requires careful attention — it helps to know the steps and what to consider. Typically, hiring a lawyer is your best option. It’s possible to draft a will on your own, but it must comply with state requirements. Below is a simple step-by-step guide to help you get started.

Decide what assets to include

Your estate consists of your assets, such as real estate, personal belongings and property. Determine which of these assets you want to have in your will.

Choose your beneficiaries

List people and organizations you want to benefit from your estate. Include their full names and specify what assets they’re to receive.

Determine if a trust is needed

Decide if you’d want a trust created after your death. You can include instructions in your will through a testamentary trust. This may be helpful in distributing valuable assets.

Pick key individuals

If you have a child under 18, it’s best to choose a guardian. Appoint a trusted person to care for your child until they reach the age of majority in your state. Pick an executor as well who will handle your estate upon your death.

Write the will

Once all necessary information is ready, you can proceed with writing the will. You can hire a lawyer to draft it for you. You may also opt to do it yourself. Make sure you properly execute the will based on state laws.

Choose witnesses

You’ll need two people to serve as witnesses. Typically, they have to be adults. Depending on the state where you live, there may be witnessing requirements.

Sign the will

Generally, your signature will validate and execute your will. The witnesses will also sign to confirm that you wrote it and had the mental competence.

Consider attaching a self-proving affidavit

This is not a requirement. But if it’s allowed in your state, it’s a good idea to have a self-proving affidavit. This makes it unnecessary for the witnesses to prove the validity of your will in court after your death.

Keep your will safe

Make a copy of the will. Keep the original and copy in a secure place. It’s important for a loved one or your executor to know where your will is stored.

Update your will if necessary

Circumstances change. So, keeping your will updated is crucial. Review it after major life events, such as the birth of another child or a divorce. If you decide to make changes, inform your executor.

Can You Write a Will Yourself?

It’s possible to write your will. It can help reduce your expenses. However, ensuring that your will complies with state laws is essential. Otherwise, your loved ones may be left with complications after you die.

Creating a will on your own is easy. You can download forms online for free. Service providers offering a will writing kit may charge fees, which are likely less than a lawyer charges. Having an attorney, however, will ensure that your will is valid and enforceable.

Getting Help Drafting a Will

There are certain circumstances when getting legal advice is necessary. Here are some of them:

Federal estate tax is involved.
Your estate may be worth more than $2 million upon death.
Family conflict is possible, and someone may contest.
You have a business or have more than 50% in a business.
You’re recently divorced.
You have children from previous relationships.
You need to assign a guardian for a minor child or dependent.
You want to delay the payment of inheritance to your children until a certain age.

Although hiring an attorney costs money, it’ll help you avoid legal issues.

CREATE A WILL

There are various resources online to help you create a will. Some will offer services at a reduced rate, and there are free forms you can download and fill out. The following resources can help you get started.

Do Your Own Will: Create a will based on the state where you live and download it for free.
Free Will: Write or update your will online for free. Simply provide basic details and information to start the process.
USA.gov — Legal Aid: This government website links various programs where you can get legal aid. You can also find resources for certain groups, including military members, veterans, seniors and people with disabilities.

How to Safely Store Your Will

After creating a will, the next step is determining where to store it. When deciding, make sure that the document remains safe. Additionally, it must be easy for your executor to find the original copy. They would need it to handle your affairs. Below are some options where you can safely store your will.

Your lawyer

Consider asking your lawyer to keep it safe. Many personal and estate lawyers have vaults or safe deposit boxes specifically for storing their clients’ documents. If your attorney keeps your will, inform your family about it.

Probate court

Depending on where you live, you may be able to file the will with your county clerk or other designated courts. This may make it easier to finish the probate as they already have your will on record. If you make any changes, you’ll have to update the will with the court.

Safe deposit box

If you have a safe deposit box, you can use it to keep your will safe. This makes it easily accessible in a time of need. However, there may be state laws for opening a deceased person’s safe deposit box. A court order may be necessary.

Your executor

You can leave the will to your executor since they’ll be the person to file it in probate court after your death. Ensure you have a backup plan if your executor is unavailable during the probate.

Online

Another option for storage is online. You can use a cloud service to keep a copy of your will. A digital copy should only be a backup. In some states, probate courts require the original signed document. Depending on the storage service you choose, there may also be a monthly fee.

A woman is researching if life insurance is needed with a will.

Do You Need Life Insurance if You Have a Will?

The short answer is yes. Although a will is an excellent estate planning tool, it doesn’t serve as a replacement for other financial instruments like life insurance. Setting up a will outlines how you want to distribute your existing estate, but a life insurance policy pays your chosen beneficiaries. Having both can help you maximize your estate planning.

How Are Wills Different From Life Insurance?

Understanding how life insurance works can help you better appreciate the importance of having a will. Generally, both are there to protect your loved ones. While a will deals with the assets and property you already own, life insurance provides future financial support.

Wills and Life Insurance: Differences and Similarities

DIFFERENCES

Necessary information: Life insurance plans tend to require more personal information, including health status and lifestyle. A will is generally focused on your estate.
Type of asset: Life insurance pays your beneficiaries a certain amount after death. On the other hand, a will distributes property and assets to your chosen beneficiaries.
Purpose: A life insurance policy payout replaces income and financial support that beneficiaries were relying on when the policy owner was still alive. A will settles affairs and determines which person receives a particular inheritance.

SIMILARITIES

Choose beneficiaries: Life insurance policies and wills both require beneficiary information. This helps in the distribution of assets and insurance proceeds. You get to choose who to name as beneficiaries.
Provide protection: Both tools help protect the future of your loved ones. They ensure that your assets are given to the right people.
Support charities: You can continue supporting your charitable causes through your will or life insurance plan. However, life insurance allows you to leave a gift to a chosen charity even while you’re still alive. Charitable donations you state in a will are distributed after you die.

3 Reasons Why You Should Still Purchase Life Insurance

For some people, having a will may seem enough. But other financial instruments may be necessary to ensure that your loved ones won’t have a hard time financially after you pass away. A good example is getting life insurance for estate planning.

Here are some reasons you should consider buying a policy:

It covers different expenses

A life insurance policy pays out a certain amount to your chosen beneficiaries upon your death. This gives them access to money they can use for various expenses, such as funeral costs, mortgage payments or college education funds.

It doesn’t go through a probate process

It’s easier to claim the proceeds of a life insurance policy. It may be available in a few days or weeks. Unlike a will, it doesn’t go through probate. That means the funds from your insurance can provide financial support while your loved ones deal with the probate process.

It can’t be accessed by creditors

Generally, the death benefits of a life insurance policy cannot be taken to pay for any of your debts. That means creditors can’t touch the proceeds. That said, if your policy beneficiary is your estate, creditors may be able to access the benefit payout.

How Life Insurance Complements a Will

The right life insurance policy and a well-drafted will can complement each other and ensure that you can support your loved ones. They allow you to maximize the advantages of end-of-life planning. Navigating both at the same time can be confusing for some people.

Below are some commonly asked questions about life insurance and wills that may help you better understand the purpose of these estate planning tools.

Is life insurance included in a will?

No, life insurance isn’t included in a will. Your will determines how you want to distribute your estate after you pass away. Life insurance cannot be considered part of your estate. That’s because it’s only payable upon your death. It also goes directly to the beneficiaries stated in your policy.

Can I use my will to distribute my life insurance?

Generally, you can’t distribute your life insurance payout using your will. That’s because the death benefits go directly to the beneficiary named on your policy. Additionally, since the payout is only released after your death, the policy is usually not considered an asset.

There’s a situation where a will can distribute life insurance benefits. If the beneficiaries you named in the policy die before you, the proceeds are paid to your estate.

What if my life insurance policy contradicts my will?

Your will is a separate legal document from your life insurance policy. In cases where the life insurance policy contradicts the will, the insurance policy is typically followed. A will can’t change the recipient of life insurance death benefits.

Does life insurance go through probate?

Unlike a will, life insurance doesn’t go through probate. That’s because the proceeds are directly given to your policy’s beneficiaries.

There are instances when life insurance goes through probate: when the beneficiaries die before the policyholder, and the insurance policy’s death benefits become part of the policyholder's estate.

Does my life insurance need to have the same beneficiary as my will?

No, it’s unnecessary to name the same beneficiary in your life insurance and will. You can name any individual or organization as your life insurance beneficiary. You may also choose to have multiple beneficiaries.

Creating a will and selecting life insurance beneficiaries are foundational to crafting a comprehensive estate plan. These decisions ensure your assets and insurance benefits are allocated as you wish, safeguarding your legacy and your loved ones' future.

When to Reevaluate Your Will and Life Insurance

Over time, your circumstances may change. You may build wealth or accumulate debt. You may also experience major life events. When any of these happen, it’s best to reevaluate your end-of-life plan, including your will and life insurance.

You can use the opportunity to review your beneficiary designations, asset distribution and the people with legal roles under your will. You may also check if your current life insurance policy is still suitable for your needs.

Change in marital status

It’s best to review your estate planning documents if there are any changes to your marital status. If you get married, you may want to add your spouse as a beneficiary. In most states, the spouse is actually considered a primary beneficiary. If you get divorced or separated, you may also revisit beneficiary designations.

Location change

State laws on life insurance and wills may vary. If you move to another state, it’s best to reevaluate your insurance policy and will. This helps make sure that your documents comply with state regulations.

Acquiring or losing property

Changes in your assets or financial situation call for a review of your will and life insurance policy. You can update beneficiary designations in your will or remove properties that you no longer have.

Having or losing children/grandchildren

To ensure that all your heirs receive an inheritance, update your will and life insurance beneficiaries when you legally adopt or give birth to a child. Similarly, if a child or grandchild dies before you, you may want to make some changes to your named beneficiaries.

Losing your executor, appointed guardian or a beneficiary

You may have to review your will if a beneficiary, guardian or executor dies before you. Create a new will to name a new executor, appoint a new guardian or change bequests and beneficiaries. If a beneficiary passes away, you also need to update your life insurance policy.

Expert Insight on Setting Up a Will

Creating a will is easier when you know more about the topic. MoneyGeek asked industry experts to share insights that may help you navigate end-of-life planning.

When is the best time to set up a will?
There are various types of wills. How do I choose the right type of will for me?
What are some financial tips that could help with end-of-life planning?

Roxanne AlexanderWealth Manager and Principal with Evensky & Katz / Foldes Financial

Laura J. LaTourette, CFP®Founder at Family Wealth Management Group

Kyle McClain, CFP®, CIMA®Partner and Senior Wealth Manager at RG Wealth Management

Jennifer LeeFinancial Advisor, Author and Founder of Modern-Wealth

Marcus P. Miller, CFP®, MBACertified Financial Planner and Financial Advisor at Mainstay Capital

John LopezSenior Professor of Practice at C.T. Bauer College of Business at the University of Houston

Chuck CzajkaCEO of Macro Money Concepts

Sarah KangFinancial Planner at UAK Diversified Wealth Management

Steve Parrish, RICP®Professor of Practice and Scholar in Residence at The American College Center for Retirement Income

Shelly Bailey, CFP®, CTFAEstate Planner at Truepoint Wealth Counsel

Guy Baker, Ph.D.Founder, Managing Director, MSM, CFP, CLU and ChFC at The Wealth Teams Alliance

Ann MurphyProfessor of Law at Gonzaga University

Jane Mepham, CFP®Founder & Principal Advisor at Elgon Financial Advisors

Dr. Jana M. Ault-PhillipsClinical Assistant Professor at Missouri State University

Jonathan D. BreedenAttorney at Law, Owner of Breeden Law Office

Eric N. KleinPrincipal Attorney of Klein Law Group

Mitchell Kraus, CAP®, CFP®, CSRIC, CLU, ChFC, CHSNC®Owner at Capital Intelligence Associates

Renee FryCEO of Gentreo

Ben MichaelAttorney at Michael & Associates

Patrick HicksHead of Legal at Trust & Will

Resources for End-of-Life Planning

Writing a will is an excellent addition to end-of-life planning, which ensures the protection of your loved ones even when you pass away. However, the process involves legal documents and multiple steps. The following resources can help you prepare your end-of-life plan.

Estate Planning

American Civil Liberties Union (ACLU): The ACLU has an estate organizer that can help document essential personal and financial information. You can also find links to various resources for estate planning.
American Bar Association (ABA): The ABA offers different resources to help consumers understand estate planning, including wills and trusts.
FindLaw: Learn about federal and state laws on wills, trusts and other estate planning procedures.

Legal Help

1-800-ATTORNEY: This is a national network composed of lawyers and law firms in various areas. Find an attorney near you or get free legal advice through the 24-hour hotline.
ABA Free Legal Answers: The American Bar Association created the Free Legal Answers website to answer some legal questions from qualified individuals. You can also find links to state-specific programs and legal aid.
LawHelp.org: Use the interactive map to find legal forms, information and programs in your state. The organization also offers referrals to local legal aid organizations for low-income Americans.
LawHelp Interactive: Find legal documents and fill them out for free. Use the dropdown menu to ensure you’re getting forms used in your state.
Legal Services Corporation (LSC): This nonprofit organization offers financial support to qualified low-income Americans in need of legal aid. Find a legal aid organization near you using the interactive map.

Life Insurance

Coalition Against Insurance Fraud: Find links to state insurance fraud bureaus, which detect and investigate scams. Check how to report suspected fraud.
National Association of Insurance Commissioners (NAIC): The NAIC is a non-partisan organization that provides data and expertise to help insurance commissioners with industry regulation.
USA.gov: This government website provides basic information about different federal laws and regulations. These include those on insurance and estate taxes.

About Nathan Paulus

Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.

Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.

sources

Caring.com. "2024 Wills and Estate Planning Study." Accessed April 7, 2024.