Why (or why not) people actually do estate planning

Jul 27th, 2022 | By | Category: Personal Finance/Consumers

While a majority of people acknowledge the importance of estate planning, a small percentage actually follow through on it.

According a New York Times survey, nearly 9 out of 10 U.S. adults are concerned about inflation. This fear of inflation plays a critical role in how people perceive their own finances, causing them to believe their savings are worth much less. It often leads to people postponing or even abandoning the idea of estate planning.

“Inflation can have significant impacts on one’s ability to save for their own future,” said Patrick Hicks, general counsel at Trust & Will, an estate-planning advisor. “The current and potential financial strains amid the COVID-19 pandemic and ongoing economic uncertainties have compelled many people to think they don’t have enough valuable assets to leave behind. A natural reaction during times of economic uncertainty is to look for ways to reduce costs by cutting unnecessary expenses. Unfortunately, it is a common mistake to focus too narrowly on the short term and overlook the importance of estate planning for the long-term future.”

While this sentiment about estate planning is understandable, the mentality may have long-term and costly consequences, Hicks advised.

“Estate planning isn’t just for the rich, and it’s about far more than the value of your assets,” he said. “Even if you don’t have an expensive home, a large IRA, and other valuable assets to pass on, you can still benefit from creating a will or living trust. There is no minimum level of wealth required to have an estate plan, and every adult should look to have a basic plan in place to care for their own needs and the needs of their family.”

To help shed light on the importance of estate planning and the processes involved, Caring.com, an online source of information about products and services for older adults, partnered with YouGov, a market researcher, to survey 2,600-plus American adults on who’s engaging in estate planning–and why or why not. Since 2015, Caring.com has conducted annual surveys to raise awareness about estate planning – especially to people who may not know how to create a will. The 2022 survey found that 50 percent more young adults (18-34 year-olds) now have estate planning documents than before the pandemic – but many others are still putting it off. Besides procrastination, a chief reason why is a perceived lack of assets – 1 out 3 people without a will say they don’t have enough wealth to leave behind. Another key factor to consider is the impact of COVID-19 on estate planning. We found that those who’ve personally had a serious case of COVID-19 are 66 percent more likely to engage in estate planning than those who haven’t.

Age plays a significant role in the conversation about estate planning. According to the survey, 41 percent of 18 to 34 haven’t talked to anyone about getting estate planning documents, and 1 out of 3 in the 35 to 54 age range has yet to start the conversation about estate planning. Meanwhile, 3 out of 4 older adults have discussed getting a will.

Although 56% of Americans think having a will is important, only 1 in 3 actually has an estate planning document. Furthermore, 60% of those without a will said they hadn’t taken any action towards getting a will, living trust, or any estate planning document.

Our research shows that talking with a loved one is the most likely first step, as 1 in 5 of those without a will have had a conversation with a loved one about it, while only 1 in 10 has started researching online.

63% of American adults believe that you should have estate planning documents by the time you’re 55 or earlier, but only 45% of those in the 55+ age group actually have estate planning documents. Again, this shows a serious disconnect between people’s beliefs and behaviors regarding estate planning.

 

Source: Caring.com

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