New on FinoLib · Volume V: Personal Finance
I have added a new article to FinoLib, my finance education website: Estate Planning: Wills, Power of Attorney, Trusts and Legacy, part of Volume V: Personal Finance. It is part 1 of a 3-part guide. This page gives you the core of the topic in expert but plain language; the full article goes much deeper.
The idea in plain words
A will is not the whole story. Beneficiary forms, not your will, decide who gets your retirement accounts and life insurance. A durable power of attorney lets someone handle your money if you become unable to, which a will never covers. A will names guardians for children and sends everything else through probate. A trust helps mainly if you own real estate in two states, have heirs who can’t manage money, or have a blended family. With a $15 million exemption per person in 2026, federal estate tax reaches almost no one.
Key points
■An outdated form beats a newer will. In an employer plan, federal law makes the plan pay the name on file even after a divorce.
■Incapacity is the gap most households leave open: without a durable POA, the fallback is a court guardianship.
■Probate cost depends on the state. California’s statutory fees on a $1,050,000 estate come to $47,000, charged on gross value before the mortgage.
■Every dollar above the federal exclusion is taxed at 40%, and portability must be elected on Form 706 even when no tax is due.
A closer look
A will directs how assets are distributed after death and names a guardian for any minor children — arguably a will’s single most irreplaceable function, since nothing else in this Part can substitute for it. Without one, state intestacy law decides everything by a fixed formula that may not resemble what the deceased actually wanted, and the estate passes through probate — a court-supervised process whose cost is often put, as a rough rule of thumb, at 3%–7% of the estate’s value (it varies widely by state and by estate) and that can take months.
Caring.com’s 2025 survey found only about 24% of U.S. adults currently have a will — down from 32% the year before (older telephone-based surveys have found higher figures, closer to 46%, reflecting real methodological differences between survey types rather than a single settled number) — but on every measure, a clear majority of American adults have no will in place at all.
A worked example
Worked Example — The Form Beats the Will
In her twenties, Dana named her brother as beneficiary on her IRA and on her employer’s group life insurance. Years later she married and signed a will leaving everything to her spouse, but never updated the forms. She dies with a $120,000 IRA, a $150,000 group life policy, and a $40,000 bank account with no payable-on-death designation. Her brother receives $120,000 + $150,000 = $270,000, paid directly by the custodian and the insurer, outside probate. Her spouse receives what the will controls: the $40,000 account, less probate costs that at the rule-of-thumb 3%–7% would run $40,000 × 3% = $1,200 to $40,000 × 7% = $2,800, plus her personal property.
Under the hood
Under the Hood: Why the Form Beats the Will
A beneficiary designation is a contract with the custodian or insurer; the money never enters the probate estate, so the will has nothing to act on. For employer plans, ERISA requires a plan to pay “in accordance with the documents and instruments governing the plan.” In Egelhoff v. Egelhoff (2001), the Supreme Court held that ERISA preempted Washington’s law revoking an ex-spouse’s designation at divorce. In Kennedy v. Plan Administrator for DuPont (2009), an ex-wife who had waived the benefits in the divorce decree was still paid, because the form named her. Outside ERISA, state law decides. Sveen v.
Why It Matters
A beneficiary designation on an IRA or a life insurance policy (Part 8.3) overrides whatever a will says — an outdated beneficiary form naming an ex-spouse, left unchanged after a divorce (Part 11.3) or remarriage, can win over a brand-new will naming a current spouse.
Edge Cases: When the Standard Answer Changes
Situation What changes Why Number or rule Divorced; ex-spouse still named on a 401(k) or employer life policy The ex-spouse is paid The plan must follow its own documents; state revocation laws are preempted Egelhoff (2001); Kennedy (2009) Divorced; ex-spouse named on an IRA or individual policy The designation is often revoked automatically State law governs contracts outside ERISA 26 states had such laws in 2018 (Sveen) Remarried; 401(k) names your children The new spouse is generally entitled to the…
What the full article covers
The full article includes worked examples, a look under the hood at the mechanics, a recap, a reveal-on-click quiz and the official sources behind every figure.
Volume V: Personal Finance
Read the full article on FinoLib
The complete article, Estate Planning: Wills, Power of Attorney, Trusts and Legacy, with every worked example, diagram, quiz and source, is free to read in Volume V, Personal Finance on finolib.com.
Explore the Finance Education Series: Vol. II — Capital Markets · Vol. I — Global Economy · Vol. III — Finance Encyclopedia · Vol. IV — Finance Careers · Vol. V — Personal Finance