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September 4, 2020

How do you make a will (and when should you update it)?

Wills aren’t really the most fun topic to read (or write!) about, but their importance in a financial journey cannot be overstated. A will is a document that explains your wishes about your responsibilities and financial assets to your loved ones after you pass away. You can get as specific as you want (i.e., you leave a certain family heirloom to a particular person) or keep it more general (i.e., you want your surviving spouse to get everything). If you don’t leave a will, there can be arbitrary rules and restrictions your family or loved ones could face, and it makes things confusing during a time of grief and adjustment.

The basics of making a will. And does it have to involve a lawyer?

Making a will doesn’t have to be complicated or time consuming. If your financial situation is not complicated, you don’t need a lawyer to help you draft a will.

If you don’t have a will, the law decides who will manage your estate and who will get it. It won’t be your decision or even your family’s decision. In addition to that, your family might get levied taxes and fees that could have been avoided with some planning.

In most instances, people can make a will on their own without the help of a lawyer or estate planner. If your financials and wishes are straightforward, you can find a template or use online software to draft a working will yourself.

Here’s how to get started:

  1. Make it easy by starting online: When we say that in most cases people are able to make their own wills, we don’t mean that they have to do it alone. There are many online services and templates that provide structure around the process. Additionally, only half of the US states recognize handwritten (holographic) wills as valid, so it might be a good idea to start with a digital platform or service. Online services like Fabric or LegalZoom are good places to start.
  2. Make a list of your assets and liabilities: What does your personal balance sheet look like? In order to leave assets behind to your loved ones, you need an up-to-date list of what you have, including real estate and land, jewelry, artwork, cars, and bank accounts that don’t name a beneficiary.
  3. Be specific about who gets what: As with any other financial documents, it helps to be as specific as possible. Use full names when describing who should receive what, and if possible, try including contact information and addresses. You should also use full, legal names to reduce any kind of confusion or contest.
  4. If you have minor children, choose a guardian: If you are responsible for any minors, you should list their full names and birth dates in your will. You should then name the person who will be legally responsible for the children in the event of your and any other primary caregiver’s death. Make sure you have this conversation with the person you are naming as the guardian.
  5. Choose a guardian for your pet(s): You can name a guardian for your pet and leave money to that person to cover future costs.
  6. Choose an executor: Naming an executor for your will is crucial. The person named to manage your estate is called the executor. That person is responsible for your estate after your death. That means looking after who gets what and making sure all your debts are paid. Most people name their spouse as executor and list a family member or close friend as a back-up. You can name more than one person as your executor. This is the person who will distribute the property, pay any remaining bills and debts, and handle transfer of assets.
  7. Final arrangements: You can also use your will to list any funeral preferences you might have.
  8. Print the will and get it signed: If you did use an online or digital service to create your will, you will need to print out a copy, sign it, and have two witnesses over 18 years of age to sign it. There can be additional rules around this step, so make sure you look up the rules in your state.

What a will cannot do

There are a few assets that fall outside the scope of a will. You were most likely asked to designate a beneficiary when first setting up your 401(k) plan and individual retirement accounts. These accounts, as well as any life insurance policies, need designated beneficiaries that will receive the assets in those accounts no matter what your will says.

For other bank accounts such as checking and savings, there are forms called payable-on-death (POD) forms that you can list beneficiaries on.

If you own property, it can have its own rules around inheritance and estate planning. Laws can vary from state to state, so be sure to look up how to properly pass on your property, keeping in mind creditors and tax implications.

If no beneficiary is listed on those non-will items, the assets automatically go into probate. That’s the process by which all of your debt is paid off and then the remaining assets are distributed to heirs. The process can last several months to a year or more, depending where you are and what’s involved in handling your estate.

When should you update a will?

You should update a will after any major changes in your life. Review it often to make sure it reflects the current state of your finances, but also if you have changed your mind about the distribution of your assets.

In some states, getting married, living common-law or getting divorced or separated can cancel any previous wills you had made. Some other life events that may need a will update include:

Set an annual reminder in your calendar to update all of your important paperwork, including your will. Scheduling this around tax season can help, since the state of your assets is still fresh in your mind.

Final note: Make copies and lists of critical documents

As you start the process of thinking about your estate and your will, also consider making an easy-to-find list of critical documents. In case of an emergency, it could be a huge help to your family to have everything on hand. Imagine your family having to deal with urgent paperwork and panic-searching for any documents they might need. Some documents to include would be:

It can seem overwhelming to get started with the process of making a will, but that might be due to the emotions surrounding the topic of death rather than the work involved itself. While we’re sure thinking about wills and guardianship is stressful, it is simply part of good financial planning. It might even be a source of relief after you’re done with the process to know that you’ve done your best to set your loved ones up for success in the event you are no longer there with them.

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