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A will, also known as a last will and testament, is a legally binding document outlining who receives your assets after you die. This document ensures that your property is distributed the way you intended upon your death. You may be able to create your own will, or you may choose to hire a lawyer to draft your will.
When the American pop star Prince died in April 2016, fans across the world mourned his unexpected passing with tributes and memorials.
His music will never die, but Prince’s legacy lives on for another reason: as a financial cautionary tale. That’s because the 57-year-old celebrity died without a will. To complicate things, Prince was divorced, childless and preceded in death by both parents.
Now, more three years later, his estimated $200 million estate is still unsettled. None of it has been distributed to his six siblings.
Meanwhile, administrators have reportedly spent $45 million of the estate to cover legal fees and other costs, according to Forbes and USA Today.
It may seem like an unusual situation, but it turns out that most Americans share something in common with the legendary musician: they don’t have a will either.
Assisted living facility Caring.com’s 2019 Will and Living Trust Survey reported that of the 1,003 adults surveyed, only 40 percent had a last will and testament.
Whether you’re a high-profile pop star or an ordinary citizen, it’s important to write down where you want your assets to go after you die. It may not be pleasant to think about, but a little planning now can save your survivors time and money later. And getting the process started may be easier than you think.
What Is a Will?
A will ensures that everything you’ve worked hard to attain is distributed the way you want after you pass away. Creating one is part of the estate planning process and should include a list of your assets and benefactors and appoint guardians for minor children.
Each will must undergo a legal process known as probate. This judicial proceeding proves the validity of a will and can last months or even years.
All wills contain basic components. These simple elements guide your assets to the right people after you pass away.
- This person is appointed to oversee your estate as it travels through probate. This role has broad authority, so appoint a trustworthy, responsible person. Your executor should also be an organized, detail-oriented individual who can handle appraisals and paperwork. It’s always advisable to designate a backup executor, too.
- Guardianship for your minor children
- Without a will, a judge will choose guardians for your children and determine who raises them.
- The people who will receive your assets after you pass away are your beneficiaries. Make sure to include specific language if you wish to leave items to godchildren, pets, friends, your church or nonprofit charities, and any other beneficiaries who are not family members.
Different forms may be required to create a will depending on where you live. A form may need to be signed by at least one witness, and some states require a notarized signature.
You can look up your state’s specific last will and testament laws on the state’s website.
Do I Need a Will? And What Happens If I Die Without One?
You may not need a will. This decision depends upon your family makeup, priorities and assets.
You may not have many assets and may think you want to leave it all to your spouse. If you are divorced or widowed, you may want your adult children to inherit everything. Most states make this process possible — even without a will.
Listing someone as a beneficiary on your life insurance or retirement account and marking your bank account payable-on-death to that same person might be enough to ensure that your assets are properly distributed.
But life is rarely simple, and things such as owning property or a business can make the process much more complicated. Wills are not just for the wealthy. Many people with seemingly simple lives and few assets can greatly benefit from having a will.
Second marriages, blended families, vacation homes, unmarried partners and estranged relatives are just some of the specific circumstances that can cause confusion and hardship for your survivors if you don’t establish a will.
If you die intestate — or without a will — state law determines how your belongings are divided and who receives what. The state also picks the executor of your estate. Generally, an estate is divided between the decedent’s spouse and children. If you are unmarried and childless, the allocation may pass to your parents, siblings and half-siblings, your nieces and nephews or your cousins. This may not be what you want.
Wills are essential for parents of minors. If you don’t have a will, a judge will designate a guardian. If one parent dies, usually the surviving parent gets custody. But things can get tricky if both parents pass away or the other parent is deemed unfit or is estranged from the family.
Things to Consider When Creating Your Will
Your “estate” is the legal term for everything you own — and it may be more than you realize. That’s why it’s important to take stock of your assets. You will need to estimate the value of large items, so it’s beneficial to include a recent property appraisal of your home and other real property.
In a modern era, you should also consider digital assets. These can include online bank and stock portfolio accounts, as well as domain names and money-generating social media accounts.
Assets add value to your estate. Debts, in contrast, detract from it. You’ll need a record of these, too.
- Credit cards
- Equity loans
- Car loans
- Student loans
- Outstanding medical bills
You must determine if you have enough cash to pay these debts. If you don’t, your executor may need to sell some of your assets to cover them.
Once you’ve assessed and documented your assets and debts, think about who will receive them upon your death. Then, make a list of beneficiaries.
Finally, decide what percentage each beneficiary will receive. For example, you could leave 25 percent of your estate as an endowment to the local art museum, then split the remaining 75 percent between your two children. The percentage you designate is a personal decision.
How to Disinherit Someone
You can leave your assets to anyone you want. You can also disinherit people, though community property laws or elective share laws in most states protect spouses from total disinheritance.
In roughly 80 percent of states, a surviving spouse who was excluded from a will can elect to take between one-third and one-half of the deceased spouse’s estate.
Disinheriting adult children and other family members is generally easier, but doing so isn’t a matter of simply leaving them out of the will. If you do this, the heir may be able to contest that you neglected to include them by mistake. Instead, a will must explicitly name the child or relative you wish to disinherit in a special clause within the document.
Disinheriting someone, especially a child, can have a long-term negative impact on a family. Be aware that wills are public, so a disinheritance will be published by the courts during the probate process.
As an alternative, if you are worried about an heir squandering his or her inheritance, you can create a trust for this person using what’s known as a “spendthrift provision.” This can be beneficial for a potential heir who has demonstrated financial risk due to addiction, immaturity or substantial debt. An independent third party — such as a financial company or attorney — manages money for the beneficiary via the trust. The heir does not have direct access to the funds, and creditors cannot come after the money.
If you still want to disinherit someone, Forbes and other experts recommend consulting an experienced estate planning attorney to prevent the person you exclude from appealing your action in court after your death.
Last Will and Testament vs. Living Trust
Wills can suffice for small or simple estates. But sometimes a different estate planning tool, known as a living trust, is more advantageous.
A living trust is a document in which another party, called a trustee, holds legal title to your property for beneficiaries. Assets are placed inside the trust when you’re alive and can be distributed to people before or after your death.
- Customizable bequests
- Trusts can include specific stipulations, such as a grandchild must graduate from college or be at least 25 years old to receive trust money.
- Probate-free bequests
- Unlike wills, trusts completely bypass probate. Many experts consider this the greatest advantage of a trust because avoiding probate saves time and money.
- Each will becomes part of the public record when it enters probate. Trusts do not.
- Shelter from estate tax
- You will not encounter federal estate tax unless your assets total more than $11.4 million. But several states have their own estate tax with lower asset thresholds. A living trust helps shelter you from these taxes.
Trusts can be complex and may not be right for everyone, but they can fulfill specific purposes. A special needs trust, for example, provides for the future financial care of disabled heirs. Many people with disabilities receive Medicaid, Social Security income, or other government assistance with strict asset limits.
Direct inheritance can disrupt these benefits. But a special needs trust allows you to transfer assets into the fund and appoint a trustee to manage the money for your heir. Technically, the disabled heir does not inherit directly and therefore does not own all the money they will eventually receive. This ensures that essential government benefits continue.
Even If You Have a Trust, You May Still Need a Will
Even if you create a trust, you may still need a will. This is especially true if you have minor children because a legal guardian can be appointed for them only in a will.
The other benefit of having both is it guarantees that all your assets are covered.
Because a trust protects only the items you place inside it, some assets may be excluded if you pass away before properly funding it. If you put your home in a trust, for example, but do not transfer $200,000 of liquid assets, that $200,000 will not receive trust-related benefits.
A pour-over will, which refers to a will that supplements a trust, ensures that any leftover assets are transferred to the trust.
Assets must still go through probate, but the process is usually faster because it leaves all remaining items to a single beneficiary — your trust.
Living trusts aren’t for everyone. They are more complicated and expensive than a will and . They also must be actively managed. Setting one up can cost as little as $500, but generally fees range between $1,000 and $3,000.
Living trusts are generally used for more complex estates.
Do You Need a Lawyer to Create a Will?
There is no right or wrong answer to this because it comes down to how complicated your finances and last wishes are.
Do-it-yourself legal websites allow users to create a will on their own. Some are free while others charge a fee. They generate a form template based on your state of residence. Once you’ve entered your personal information, you receive a valid will that’s legal in your state.
If you have limited assets, these websites might work for you. But such services may not be adequate for complex estates or unique situations. Be honest and decide if you can confidently navigate this process by yourself. Simple mistakes can create delays and headaches for your survivors.
The cost of drafting a will can vary. According to the American Association of Retired Persons, it costs between $20 and $100 to create a will online. Hiring a lawyer to do the job can cost anywhere from $100 to $1,000.
If you do meet with a lawyer, do your homework first and be as prepared as possible. Many law firms provide a checklist of documents to bring to your first consultation. Doing so can save time and money. Get an up-front estimate of how much it all costs.
You can also create a free will online and take it to an attorney for review. He or she can confirm that your will is easy to understand and complies with state laws.
Sign Your Will and Keep It Safe
After your will is created and signed, store it in a safe, easily located place. Your home or office are logical locations. Leave copies with a trusted family member, the executor of your will and your attorney. You can also place a copy in a fire-proof safe. But make sure someone has the combination and knows how to access it.
Don’t leave the sole copy of your will in a safe deposit box at the bank. Many states require a court order to open a deceased person’s safe deposit box.
You may want to consider storing other important documents with your will. These can include deeds, mortgage contracts, marriage certificates, investment information and account numbers.
Keep Your Will Updated
A will never expires. If it was executed correctly, your will is good for the rest of your life.
But it’s essential to keep it updated. It’s good practice to review it every three to five years or if your circumstances drastically change.
- At the birth, adoption, or death of a child
- After marriage, divorce or separation
- When you move to a new state
- After major income changes
An outdated will can create unintended consequences for your estate and survivors. For example, a husband and wife may unintentionally disinherit their youngest son if he was born after their will was created.
10 Cited Research Articles
- Caring.com. (2019). 2019 Survey Finds That Most People Believe Having a Will Is Important, but Less Than Half Have One. Retrieved from https://www.caring.com/caregivers/estate-planning/wills-survey/
- Carlson, B. (2018. December 2). 7 Reasons It's Time To Update Your Estate Plan. Retrieved from https://www.forbes.com/sites/bobcarlson/2018/12/02/7-reasons-its-time-to-update-your-estate-plan/#27cbfd505ebf
- Carlson, B. (2019, August 28). Wills Vs. Trusts: Which Is Best For You? Retrieved from
- CNN Money. (n.d.). Estate planning: Wills and trusts. Retrieved from https://money.cnn.com/pf/money-essentials-wills-trusts/index.html
- Puente, M. (2019, April 21). Prince died three years ago, his estate is still unsettled: Here's why. Retrieved from https://www.usatoday.com/story/life/2019/04/18/prince-died-3-years-ago-his-estate-still-unsettled-heres-why/3344038002/
- Sahadi, J. (2016, April 28). Here's what happens when you die without a will. Retrieved from https://money.cnn.com/2016/04/28/pf/dying-without-a-will-prince/index.html
- Legal Information Institute. (n.d.). Elective Share. Retrieved from https://www.law.cornell.edu/wex/elective_share
- USA.gov. (n.d.). State Government. Retrieved from https://www.usa.gov/states-and-territories
- Wiewel, B. (2018, December 11). How To Disinherit A Family Member. Retrieved from https://www.forbes.com/sites/nextavenue/2018/12/11/how-to-disinherit-a-family-member/#200bb30d2695