Editor’s Note: This story originally appeared on SmartAsset.com.
Estate planning has become less of a priority for middle-aged adults, according to a new survey.
Americans aged 35 to 54 are for the first time less likely to have a will than people aged 18 to 34, according to a Caring.com poll of 2,500 adults. This is not a good sign for middle-aged adults, especially those with children they would like to leave something behind.
An estate plan is an important part of financial planning because it ensures that your assets will be passed on to your loved ones or to the causes you support at the time of your death. A financial advisor with experience in estate planning can help you get through this important phase of planning.
Here’s a quick look at trends in estate planning and some of the most important and common estate planning documents to consider.
Trends in estate planning
For the first time since Caring.com began asking Americans about estate planning, younger adults are now more likely to have estate planning documents than middle-aged adults. Almost 27% of respondents aged 18 to 34 said they had estate planning documents, up from 18% in 2019. Meanwhile, less than 23% of people aged 35 to 54 have estate planning documents. , compared to 37% two years. earlier.
The oldest age group in the survey experienced a similar decline in the prevalence of estate planning. Although people aged 55 and over are the most likely to have a documented estate plan, this share has increased from 60% in 2019 to 44% in 2021.
“Regarding, those in the age groups who need these documents the most are less and less likely to have one,” wrote Daniel Cobb, editor-in-chief of Caring.com. âThere is good news, howeverâ¦ the number of young adults with wills or other estate plans has increased 63% since 2020. This demographic was very motivated by COVID-19. “
Estate planning appears less of a priority for the whole country. Only 33% of American adults have estate planning documents, up from 42% in 2017.
The survey, which was conducted in conjunction with YouGov in December, asked respondents why they didn’t have a will or other estate planning documents. “I did not succeed” remains the No. 1 reason (34.2%), while “I do not have enough assets to leave anyone” is the second most common response (28.1% ) persons without wills or trusts.
“COVID-19 hasn’t changed the fact that nearly two-thirds of Americans say having a will is somewhat or very important, but only one-third actually have estate planning documents,” Cobb wrote.
Estate planning isn’t just about what happens to your money and property when you die. An estate plan can include health care guidelines and vital guidelines for the care of minors in the event of an unexpected death.
Last will and testament
A will is one of the most basic estate planning documents available. A will allows you to dictate the distribution of your property upon your death.
A will designates the beneficiaries – individuals or organizations – who will receive your property, as well as an executor who will be responsible for carrying out your wishes and settling outstanding debts. A will can also name someone to act as guardian for your children.
Drafting a will can be relatively straightforward, especially if you don’t have an overly complicated estate. You can write a will online through one of the many services such as LegalZoom or Nolo.com, or hire an estate planning lawyer or financial advisor to help you with the process.
A trust is a legal entity created to hold your assets and transfer them to beneficiaries upon your death. People with large or more complex estates can create a trust to ensure their assets are distributed through a tax-efficient process outside of the probate process.
A trust can be revocable or irrevocable. While the first can be changed during your lifetime, the terms of an irrevocable trust are permanent at the time the document is signed.
Like an executor, a trustee is a designated person responsible for managing the trust and transferring its assets to beneficiaries. Trusts, which come in many variations, can protect creditors’ assets and minimize inheritance taxes that may be owed upon your death.
While you can technically set up a trust online, working with an estate planning lawyer or financial advisor who specializes in estate planning may be your best option for setting up a trust properly.
After choosing a type of trust, naming your beneficiaries and trustee, your lawyer or advisor will formalize the details by creating a declaration of trust, deed of trust or instrument of trust.
After your lawyer has completed the document, you may need to sign it in front of a notary. You will then fund the trust by transferring your assets to it.
Power of attorney and advance directives
Power of attorney is another important estate planning tool that authorizes another person to act on your behalf in certain circumstances.
An Enduring Power of Attorney can be particularly vital in the event of an accident that leaves you temporarily unable or unable to make important financial decisions.
The person who has the legal authority to act on your behalf is known as the agent or attorney in fact. They can be granted broad powers or limited powers, depending on your wishes as the principal.
Advance directives state a person’s wishes regarding end-of-life care or what should happen if they become unfit. Similar to an enduring power of attorney, an advance directive will describe how to manage your health care if you are unable to express your views in the event of an accident or illness. Despite the importance of advance directives, nearly a fifth of all survey respondents said they did not know what the term meant.
As a general rule, you must be at least 18 years of age and of sound mind to create an advance directive. It must be in writing and signed by you and one or more witnesses. The directive may also need to be notarized, but you will need to consult your state’s laws for more details.
Although it’s an important part of adulthood, estate planning seems to be losing ground, at least among middle-aged and older Americans. A Caring.com survey found that young adults aged 18 to 34 are now more likely to have a will or other essential estate planning documents than those aged 35 to 54.
While some people may just need a will to plan their estate, others may opt for a trust, which allows an estate to bypass the estate court. Powers of attorney and advance directives are also useful tools that can play a role in your estate plan.
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