If you don't currently have a will, your loved ones may not receive the assets you wish to leave them in the event of your death. If you're unsure of where to start, read on for the basic information you need to know when you're considering making a will.

What Is a Will?
A will is a legal document that sets forth your wishes regarding the distribution of your property and the care of any minor children. Wills come in several varieties, including the following:

Self-Proving/Testamentary Will
A self-proving will, also know as testamentary will, is the traditional type of will with which most people are familiar. It is a formally prepared document that is signed in the presence of witnesses.

Holographic Will
Holographic wills are written without the presence of witnesses. They rarely hold up in court.

Oral Will
Oral wills are spoken testaments given before witnesses. They are not widely recognized from a legal perspective.

Living Will
A living will has nothing to do with the distribution of assets, but rather sets forth your wishes for medical care in terms of life support should you be incapacitated.

To maximize the likelihood that your wishes are carried out, you want a will that is set forth in writing, and signed by you and your witnesses. If your will does not meet these standards, your instructions may not be carried out.

Why Do I Need One?
Creating a will gives you sole discretion over the distribution of your assets. It lets you decide how your belongings, such as cars or family heirlooms, should be distributed. If you have a business or investments, your will can direct the smooth transition of those assets.

If you have minor children, a will lets you provide for their care. If you have children from a prior marriage, even if they are adults, your will can dictate the assets they receive. Creating a will also minimizes tensions between survivors. Relatives battling over your possessions can weaken what may have otherwise been a strong family.

If you are charitably inclined, a will lets you direct your assets to the charity of your choice. Likewise, if you wish to leave your assets to an institution or an organization, a will can see that your wishes are carried out.

What Doesn't It Cover?
While wills generally address the bulk of your assets, there are a variety of items that are not covered by the instructions in a will. These items include community property, proceeds from life insurance policy payouts, retirement assets, assets owned as joint tenants with rights of survivorship and investment accounts that are designated as "transfer on death."

What Happens If I Don't Have One?
If you do not have a will, you die intestate. In such a case, the state will oversee the distribution of your assets. Contrary to popular opinion, the state does not inherit your assets, but rather distributes them according to a set formula. The formula often results in half of your estate going to your spouse and the other half going to your children. Such a scenario can result in the sale of the family home or other assets, negatively impacting the surviving spouse. This can create financial and emotional difficulties, particularly if your spouse was counting on the bulk of your assets to maintain his or her standard of living. Further complications can arise if your children are minors, as the court will appoint a representative to look after their interests.

Tax considerations are another important issue to consider, as a properly prepared will can minimize tax liability. This is particularly important to people with large estates. In the U.S., assets in excess of $5 million (as of 2010 or later) are taxed when they are transferred from one person to another.

How Do I Get a Will?
When you are ready to prepare a will, compile a list of your assets and debts. Be sure to include the contents of safe deposit boxes, items of sentimental value, family heirlooms and other assets that you wish to transfer to a particular person or entity. If your estate is substantial (ranging in the millions of dollars) or your situation is legally complex, you may wish to enlist the services of an attorney. If so, be sure to work with someone who is familiar with your state's laws and has extensive experience writing wills. Your state bar association may be able to help you locate a suitable attorney.

If you are comfortable taking care of the task on your own, there are a number of software programs available to assist you, as well as a variety of websites. Simply follow the instructions provided.

How Can I Change My Will?
Changing your will is easy. Simply write a new will to replace the old one, or make an addition using an amendment known as a codicil. Ideally, you want to make any changes when you are of sound mind and in good health. This limits the likelihood that your wishes can be successfully challenged and avoids decisions made in haste or under intense emotional pressure.

What Do I Do with It Once It's Done?
Creating your will is the first step in a two-step process. The second step is putting your will in the hands of your executor or professional advisor. Remember, your wishes can only be carried out if they are known. Putting your will in capable hands ensures that it will be available when it is needed.

The Bottom Line
Making a will is a necessary and usually fairly simple process that can save your family time, money and grief as well as give you peace of mind.

Related Articles
  1. Retirement

    Ethical Wills Share Final Thoughts With Heirs

    This document allows a testator, the person making the will, to leave a personal legacy.
  2. Savings

    How To Set Up A Trust Fund If You're Not Rich

    You don't need to be worth millions to create your own trust fund. Learn how your money can be handled in the event of your death.
  3. Options & Futures

    Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  4. Retirement

    The Cities Where the Ultra-Rich Retire in Florida

    Understand why the Florida communities of Miami Beach, Palm Beach and Key West serve as magnets for the ultra-rich retirees who descend on the state.
  5. Retirement

    The 5 Best Retirement Communities in Austin, Texas

    Discover five of the most desirable retirement communities for seniors located in the Austin/Georgetown metropolitan area in Texas.
  6. Personal Finance

    Common Estate Planning Mistakes

    Estate planning requires careful consideration over the course of years.
  7. Professionals

    Estate Planning Tips

    Estate planning requires careful consideration over the course of years.
  8. Personal Finance

    Your Heirloom Jewelry: How Much Is It Worth?

    You grandma's diamonds are now yours. Whether you plan to keep them or not, you first need an honest appraisal. Here's how to get one.
  9. Retirement

    4 Reasons Why Americans Retire in the Dominican Republic

    Understand why many Americans are deciding to retire internationally. Learn about the top four reasons why Americans are retiring to the Dominican Republic.
  10. Retirement

    You Would Be Crazy to Retire in These 3 States

    Learn the common criteria for choosing a retirement destination, and understand why you would be crazy to retire in Oregon, Missouri or Alaska.
  1. Can my 401(k) be seized or garnished?

    As long as your retirement funds are held in your 401(k) and you do not take them as distributions, your 401(k) cannot be ... Read Full Answer >>
  2. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
  3. What are the best ways to use your 401(k) without a penalty?

    The best way to use your 401(k) retirement savings account is to take normal distributions after you reach retirement age. ... Read Full Answer >>
  4. How are spousal benefits calculated for Social Security?

    The amount of your Social Security spousal benefit depends on a number of factors, including your age, the maximum amount ... Read Full Answer >>
  5. How does divorce affect Social Security benefits?

    If you are eligible to receive Social Security retirement benefits on your own account, your marital status has no impact ... Read Full Answer >>
  6. Can I put my IRA in a trust?

    You cannot put your IRA in a trust while you are living. You can, however, name a trust as the beneficiary of your IRA and ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!