In recent years, Americans have faced increasing income inequality and rising inflation, affecting all aspects of their lives, including estate planning. According to Caring.com’s 2024 Wills and Estate Planning Survey, only 32% of Americans have an estate plan in 2024, marking a 6% decline from last year. This drop highlights a troubling trend, particularly for lower-income households who are disproportionately impacted by economic pressures.
Decline in Estate Planning in 2024
For the first time since 2020, fewer Americans have wills. Despite 64% of people acknowledging the importance of having a will, the prevalence has decreased to just 32%. This gap is partly due to misconceptions about the necessity of estate planning. Notably, 40% of those without a will believe they don’t have enough assets to leave anyone. This belief is twice as common among lower-income Americans, indicating that economic challenges discourage them from creating estate plans.
Essential for All, Not Just the Wealthy
Patrick Hicks, General Counsel of Trust & Will, emphasizes that estate planning is crucial for everyone, regardless of financial status. Wills and estate plans aren’t just about distributing assets; they also include essential directives for healthcare, digital assets, and guardianship for minor children. Hicks stresses that every person over 18 should have an estate plan to ensure their wishes are honored.
Inflation’s Impact on Estate Planning in 2024
Inflation has significantly influenced Americans’ views on estate planning. Younger adults (18-34) are particularly affected, with 35% seeing a greater need for estate planning due to inflation. Concerns about the impact of rising costs on their heirs’ financial futures drive this awareness. Conversely, some Americans see less need for estate planning as inflation devalues their assets or forces them to sell off belongings.
Barriers to Estate Planning
Procrastination remains a primary barrier, with 43% of Americans delaying estate planning. However, the perception of having too few assets is increasingly common. In 2024, 40% of people cited this reason, up from 33% in 2022. This growing trend highlights the need for better education on the importance of estate planning, regardless of asset size.
Understanding Key Estate Planning Documents
When diving into estate planning, you’ll encounter three primary documents: wills, trusts, and advanced directives.
- Wills: Wills are the cornerstone of most estate plans and are the most commonly known document according to the Caring.com 2024 Wills Survey. A will outlines how your property should be distributed, who will care for minor children, how debts should be handled, and more. While a will can cover all basic estate planning needs, it might not be sufficient for those with significant properties or potential family disputes. In such cases, additional documents like trusts may be necessary.
- Trusts: Trusts offer several advantages, particularly for those with larger estates, significant properties, or potential disabilities. Unlike wills, which come into effect after death, trusts (such as living trusts) are active as soon as they are enacted. This means that assets placed in a trust can be managed during the trust creator’s lifetime. Trusts can also help avoid the lengthy and expensive probate process.
- Advanced Directives: Advanced directives, also known as healthcare directives, specify your wishes for medical care if you become unable to communicate them yourself. These directives are crucial during your lifetime, unlike wills which take effect after death. Despite their importance, nearly 20% of people are unaware of what an advanced healthcare directive is, according to Caring.com’s survey.
Understanding and incorporating these documents into your estate plan ensures your wishes are honored and provides peace of mind for you and your loved ones.
Economic challenges and inflation have significantly impacted Americans’ approach to estate planning, particularly for lower-income households. Understanding the importance of wills and estate plans is crucial for ensuring one’s wishes are carried out and providing peace of mind. If you need assistance with estate planning, our team at Krugler Law is here to help you navigate the process and secure your future.