Is there such thing as heaven or hell? Are they just a state of being? Why are we divided into three degrees of heaven? And if the wicked go to the telestial kingdom, who goes to the spritual prison? I do not see why God would put the non-believers into prison and get a second chance of knowing him if we would all know when the day comes?
I think the core of your question is what I want to address first, that being ‘Is good and evil based upon eternal truth, or merely an element of the human mind?’
Stated another way, ‘Are our actions important in this life alone, or in the eternities after this life?”
When you ask “Are they just a state of being?”, I want to ask you what ‘a state of being’ is. After all, a spirit returning to a resurrected body is very much a state of being. I think you mean to ask, are heaven and hell real places or merely conditions in the mind.
While I don’t want to get too philisophical, good and evil are somewhat misunderstood today. What was considered evil just ten years ago is now accepted as normal. What was considered good just ten years ago is now seen as ‘backwards’ or old-fashioned. Morality is an ever-shifting idea in the history of mankind, however in the scriptures it is a clear-cut standard from the beginning. The question to be asked is this; Who has defined morality best, the world, or God, through the scriptures?
Is stealing wrong? Is lying wrong? You could ask these questions of any standard set in the scriptures. I want to tell you with sincerity that good and evil are both real influences in our lives. The more we lean one way or the other will define our lives in the long run. After the years I’ve lived thus far, I can tell you that obedience to God’s commandments brings the greatest measure of happiness possible, as he has promised us time and time again.
Wickedness may be fun for a time, and bring brief joy, but soon the fun ends, the joy disappears, and all that is left is emptiness. Wickedness never was (nor ever will be) happiness.
I can assure you heaven and hell are real places, as are the three kingdoms of glory within heaven. Let me explain what has been revealed about our lives after mortality. When we die, we go to one of two places, Paradise or Spirit Prison. Paradise is for those who have been obedient to God’s commandments throughout human history. Spirit prison is for those who have not been obedient to God’s commandments or those that have not had the opportunity to learn of the gospel of Jesus Christ. The first thing to understand is that those in Spirit Prison are not destined to remain there forever. The first step in moving from Spirit Prison to Paradise is to accept baptism performed on one’s behalf in the temple. The next step is repenting for sin. It is possible, but very difficult compared to repenting during this life. All the spirits of mankind will remain in either place until the process of resurrection begins. The most righteous will be resurrected first and the least righteous will be last.
The final judgement will begin, and each person will be sent to whatever kingdom they have attained to in their lives. The Celestial Kingdom is the highest, and where Heavenly Father dwells. Those who reach this kingdom will have accepted all the ordinances of the gospel of Jesus Christ. Those who have been sealed in the temple to their spouses will reach the highest level within the Celestial kingdom.
The Terrestrial Kingdom is next, and is given to those who were faithful believers in Christ, but did not receive or accept the ordinances of the gospel of Jesus Christ. These people would have been generally righteous in their lives, and seen as good people by their peers.
The Telestial Kingdom is third. As you mentioned in your question, even those who were regarded as wicked will inherit this kingdom of heaven.
The fourth kingdom is called Outer Darkness, and is reserved for very few people indeed. Very special conditions must be met to be consigned to this fate, and most of the human race will not be at risk of this at any point in their lives.
So, now let me go over your questions with all this in mind.
-There is a heaven and a hell, and our actions along with our beliefs will determine where we go.
-There are three degrees because humanity will have been faithful to God in varying degrees. God understood this from the beginning and organized things to best provide for our eternal happiness.
-Spirit Prison is a temporary place given for those who must suffer for sins they did not repent of during their lives on earth. Jesus Christ indeed suffered for all sin, but if we are not faithful to Christ and if we do not lean upon his Atonement and repent during this life, we must pay for our own sins once we die.
God loves us very much and wants us to be happy and blessed for eternity, however he cannot force it upon us, nor can he use his love to keep us from justice. The Plan of Salvation is established to give us as many opportunities to return to His presence as possible.
Finally, knowing God is not the same as being worthy to reside with Him. Remember Lucifer was in heaven at the beginning. He knew God as well as any being could, yet he rebelled against God and was cast out of heaven. When the day comes that we all know and accept Jesus Christ as the Savior and Redeemer, it will indeed be a ‘Great and dreadful day.’ Great for those who have been obedient to what Christ taught, and dreadful for those who have not been obedient. Those who have been obedient will rejoice to see their Savior, and those who have not been obedient will be horrified at the guilt of disobedience to the Savior standing before them.