Editor’s Note: This story originally appeared on SmartAsset.com.
A new survey indicates that estate planning is becoming less important for middle-aged adults.
Americans between the ages of 35 and 54 are becoming less likely to have a first-time will than people between the ages of 18 and 34, according to a Caring.com survey of 2,500 adults. This is not a good sign for middle-aged adults, especially those with children who would like to leave something for them.
An estate plan is an important component of financial planning, as it ensures that your assets pass to loved ones or the causes you support at the time of your death. A financial advisor with experience in estate planning can help guide you through this important stage of planning.
Here is a brief summary of estate planning trends and some of the most important and common estate planning documents to consider.
Estate Planning Trends
For the first time since Caring.com began surveying Americans about estate planning, younger adults are now more likely to have estate planning documents than middle-aged adults. Nearly 27% of 18-34-year-olds surveyed said they have estate planning documents, up from 18% in 2019. Meanwhile, less than 23% of people in the 35-54 age group have Estate planning documents, down from 37% for two years earlier.
The older age group in the survey experienced a similar decrease in the prevalence of real estate plans. Although people 55 or older are most likely to have a documented real estate plan, that share has fallen from 60% in 2019 to 44% in 2021.
“Alarmingly, those in the most age groups who need these documents are less likely to actually own them,” Caring.com Managing Editor Daniel Cobb wrote. “However, there is good news…the number of younger adults with a will or other property plan has increased by 63% since 2020. This demographic has been heavily driven by COVID-19.”
Estate planning seems less of a priority for the country as a whole. Only 33% of American adults have property planning documents, down from 42% in 2017.
The survey, conducted jointly with YouGov in December, asked respondents why they did not have a will or other estate planning documents. “I didn’t get around it” remains the number one reason (34.2%), while “I don’t have enough assets to leave anyone” is the second most popular response (28.1%) from people who don’t have wills or trusts.
“COVID-19 has not changed the fact that nearly two-thirds of Americans say having a will is somewhat or very important, yet only a third of them actually have property planning documents,” Cobb wrote.
Estate planning isn’t just about what happens to your money and assets when you die. An estate plan can include health care directives and vital directions for the care of minors in the event of an unexpected death.
The last commandment and covenant
The Last Will is one of the simplest estate planning documents available. A will enables you to dictate how your assets will be distributed upon your death.
The A will names the beneficiaries – the people or organizations – who will receive your property, as well as the executor who will be tasked with carrying out your wishes and settling any outstanding debts. A will can also designate someone to be the guardian of your children.
Creating a will can be relatively simple, especially if you don’t have a very complex estate. You can draft a will online through one of the many services such as LegalZoom or Nolo.com, or hire an estate planning attorney or financial advisor to help with the process.
A trust is a legal entity created to hold your assets and transfer them to your beneficiaries upon your death. People with large or more complex estates can set up a trust to ensure that their assets are distributed in an efficient tax process outside of the probate process.
The trust can be either revocable or irrevocable. While the former can be changed during your lifetime, the terms of the irrevocable trust are permanent at the time the document is signed.
A trustee, like an executor, is a designated person responsible for managing the trust and transferring its assets to the beneficiaries. Trusts, which come in many variations, can protect assets from creditors and reduce estate taxes that may be owed upon your death.
While you can technically create credit online, working with an estate planning attorney or financial advisor who specializes in estate plans may be your best option for establishing credit properly.
After you choose a type of trust, called the beneficiaries and trustee, your attorney or advisor will formalize the details by creating a deed of trust, deed of trust, or deed of trust.
Once your attorney completes the document, you may need to sign it in front of a notary. You will then fund the fund by transferring your assets to it.
Power of attorney and advance directives
A power of attorney is another important estate planning tool that allows someone else to act on your behalf in certain circumstances.
A permanent power of attorney can be especially vital in the event of an accident that leaves you temporarily incapacitated or unable to make important financial decisions.
A person who has been given the legal authority to act on your behalf is actually known as an agent or attorney. They may be given broad authority or limited powers, depending on your wishes as an administrator.
Advance directives state the person’s wishes regarding end-of-life care or what should happen if they become disabled. Similar to a permanent power of attorney, an advance directive will determine how your health care will handle if you are unable to express your opinions 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 the meaning of the term.
Generally, you must be at least 18 years old and of sound mind to create an advance directive. It must be written and signed by you and one or more witnesses. The directive may also need to be documented, but you will need to refer to state laws for details.
Despite being an important component of adulthood, estate planning appears to be losing momentum, at least among middle-aged and older Americans. A Caring.com survey found that young adults between the ages of 18 and 34 are more likely to have a will or other essential documents for estate planning than people between the ages of 35 and 54.
While some people may only need a will to plan their estate, others may choose a trust, which enables the estate to bypass probate court. A power of attorney and advance directives are also useful tools that can play a role in your estate plan.
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