3 things we learned about estate planning in 2024

December 26, 2024 11:45 AM

Research shows most Americans have neglected to do any estate planning, even though many consider it important.

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As 2025 is about to begin, many Americans are looking to the future — but they may not be looking far enough ahead.

Over the past year, several studies have shown that most Americans are behind on their estate planning. According to the will-writing website FreeWill, only 26% of U.S. adults have done any estate planning at all.

There are multiple reasons for this reluctance. One is a natural discomfort with talking about death. Another is a lack of financial literacy, which research shows is particularly prevalent among young people. And some Americans, particularly millennials and Gen Zers, find building wealth so difficult that they doubt they'll have anything to leave behind.

Whatever the reason, America's problem with estate planning is an opportunity for wealth managers. Only about one-third of millennials, for example, have written a will of any kind — but 57% of them are open to working with a financial advisor, according to the estate planning services company Trust & Will.

So an advisor who knows which of his clients are behind on their estate planning — and how to bring up the subject — can provide a valuable service. Over the past year, here are some of the stories Financial Planning has covered on the state of estate planning in the United States:

Millennials are behind on estate planning, and they know it

Sometimes there's a big gap between knowing you should do something and actually doing it. According to Trust & Will, 81% of millennial Americans think it's important to have a will at their age. But only 36% have an estate plan of any kind.

What could explain this disconnect? Research points to a lack of financial literacy. Only 58% of millennials said they had ever discussed estate planning with an older family member, and 34% had no idea whether their parents have an estate plan, according to Trust & Will.

In reality, anyone can plan for what happens after they die or suffer a health crisis — and not just with regard to their finances. For example, a will can specify who should take care of one's pets, or who's allowed to read their texts and emails.

"An estate plan doesn't necessarily have to be made when you have a lot of assets," said Samuel Deane, founder of Deane Wealth Management in Atlanta and a brand ambassador for Trust & Will. "It could be as simple as, 'Hey, I'm 18 now and I'm responsible for myself as an adult. And if something were to happen to me, I want to have control over who gets to make health care decisions on my behalf. Or if something happens to me, I get to control who gets my dog.'"

READ MORE:

Millennials know estate planning is important — but most still ignore it

How to talk to clients about death

It's uncomfortable to contemplate your own demise, let alone plan for it in detail. But for a financial advisor to help with someone's estate planning — or even estimate their retirement spending — that's exactly what they must do.

This raises a tricky question: How do you talk to a client about death without spooking them? Planners have employed a wide range of methods to gently acknowledge their customers' mortality, from cracking jokes to matter-of-factly focusing on the numbers.

In one of this year's "Ask an Advisor" columns, a Los Angeles planner asked his fellow wealth managers how to handle this conversation. His clients needed to plan for their children's inheritance, but no one wanted to bring up the "D" word. How could he broach the subject without "freaking them out"? Advisors from across the country wrote in to offer their advice.

READ MORE:

Ask an advisor: How can I talk about trusts without dwelling on death?

Why putting pets in your will isn't such a fur-brained idea

To many Americans, the idea of putting a pet in one's will may sound ridiculous. The suggestion conjures images of eccentric heiresses who bequeath their fortunes to their dogs — characters like the real estate billionaire Leona Helmsley, who in 2007 left $12 million to her white Maltese.

In reality, there are very rational reasons to include pets in clients' estate planning. Chief among them is this: If a pet owner dies or is incapacitated, someone else will need to take care of their animal, and most pet parents would like to choose who that person is.

Unfortunately, this is far from a common practice. In general, only 26% of Americans have an estate plan, according to a study by FreeWill. And within that small segment of the population, only 50% of pet owners with an estate plan have written their animals into it.

As for the other half, FreeWill found that 20% have made "informal agreements" with a future pet guardian, and the other 30% have no plan at all.

Many financial advisors have noticed this pattern among their pet-owning clients.

"Most Americans have a hard enough time doing estate planning for their family, so it's no surprise that it's even harder to get started when taking care of one's pets," said Mitchell Kraus, owner of Capital Intelligence Associates in Santa Monica, California. "Many of my clients feel awkward asking their friends or family members to take care of their pets after they are gone — they don't want their pets to be a burden."

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Few Americans put their pets in their wills. Here's why they should