The strength of a will is its ability to help you plan, now, for what you want to happen to the things you have and the people you care about.
Big events—marriage, having kids, buying a house, to name a few—are very often the triggers that prompt us to think deeply about future planning. That planning often includes creating (or updating) a will.
It’s a good task to complete, but one that far too many don’t have time or resources to take care of: Only about 24% of Americans have a will, and 55% have no estate documents at all.
Maybe it’s time to rethink wills: As much as you need to have them, you may want to have them. You don’t need a minimum net worth or age to take advantage of what a will has to offer; you can simply have items that mean something to you, and may mean something to someone in your life, too. A will is a tool you can use to help you ensure your financial plans those goals are actually carried out. Here’s how and why you can use one, how to create yours, and when to update it.
Sometimes referred to as a last will and testament, a will is a legal document that a person uses to specify what happens to their assets after they die. A will is also used to designate guardians for any minor children, as well as an executor, who is responsible for managing the estate and seeing your wishes carried out. As a will is administered, it goes through probate, which is simply a court overseeing the legal requirements and ensuring a person’s wishes are carried out. That also means that wills become part of the public record.
A will generally has to be written, on paper. Different states have different rules for how wills must be formalized, but in general, two witnesses to a will’s signing may be required.
Dying without a will is called intestate. In that case, state regulations take over the management and distribution of your estate. Without formal guidance, a court will be left to do its best, including by your heirs, and probate—that court-overseen process—may take longer, too.
A will might sound like something you don’t need until later in life when you have more assets or children, for example. But a will is important for every person, at every age. You likely have assets that matter quite a lot to you, and you might have savings such as a retirement account that may benefit someone should you die. A will is simply a legal document that gives clear instructions what you want to happen to your money and belongings. Otherwise, a court will do it for you. “It’s the foundation the rest of your estate plan is built on,” says Stanley Poorman, a financial professional at Principal®.
A will doesn’t have to be scary, difficult, or expensive. Here’s what to do:
- Make a list of all your assets. That includes savings and retirement accounts (although check the beneficiary details in “What’s not included in a will” below); investments such as stocks, bonds, and mutual funds; real estate; life insurance policies; annuities; and other property such as vehicles, jewelry, and family heirlooms.
- Decide who benefits from your estate when you die.
- Choose guardians for minor children. Start by having formal conversations with people you may want to raise your children. Do you share the same goals for child-rearing? Do you have their consent to name them in your will? A note of caution: Although you may nominate a guardian, the courts will issue a mandate believed to be in the best interest of the child. So be very descriptive when explaining your choice, especially if the named guardian isn’t an immediate family member. Maybe it’s a close relationship, similar belief systems, or a residence in your school district and you don't want your child to go through even more changes.
- Name an executor. The executor of your estate is the point person for carrying out the terms of your will. To avoid surprises or conflicts, talk to this person to ensure they’re able and willing. You may want to give them a copy of the completed will as well as any future updates or changes. Or, ensure they know where to find it.
- Create your own will or work with a professional. If you want, you can consult with an attorney to help answer legal questions and guide you through the will-making process. In some cases, however, you may be able to use a free or low-cost online tools, especially if you don’t have minor children and have a modest, uncomplicated estate.
- Make your will official. Most states require your will to be signed by two witnesses who are at least 18 years old and aren’t beneficiaries of your estate. Some states also require it to be notarized. (Search online for “state requirements for wills.”)
Some accounts, such as a 401(k), are not included in a will. That’s because beneficiary rules differ based on account type.
Take 401(k)s: Federal law mandates that the beneficiary is a surviving spouse. To circumvent this, you must obtain a waiver and spousal consent. For IRAs, on the other hand, no spousal waiver is needed—unless you live in a community property state.
The takeaway? Keep up to date on all your beneficiaries on all policies and accounts, and consult a financial professional with any questions.
Many people do use big life events as triggers for updating important documents like a will, and that’s OK. But it’s also a good idea to just put a date on the calendar, each year, to check in with what you have and make any changes. You can also update executors with details such as names of trusted professionals and potential beneficiaries if you’ve made any changes to your plans.
If you have a Principal account, you and your spouse can also access free online resources to prepare your own will and other estate planning documents from ARAG®. You’ll need your Principal login and will have to create an ARAG account, too.
