Recent research indicates a notable decline in estate planning among various demographics, including older Americans, business owners and art collectors. This trend is concerning, given the importance of estate planning in ensuring the orderly transfer of assets and minimizing potential legal and tax complications.
Decline in Estate Planning Among Older Americans
A 2023 Wills and Estate Planning Study by Caring.com highlights a decline in estate planning among older Americans. This trend raises concerns as estate planning is crucial for ensuring one’s wishes are honored and beneficiaries adequately provided for.
Estate Planning Among Business Owners
Estate planning is particularly critical for business owners due to the complexities of transferring business ownership and assets. Despite this, about 85% of successful business owners have estate plans that are more than 5 years old, which could lead to unintended consequences due to changes in tax laws and personal circumstances. This indicates that many business owners may have outdated estate plans, underscoring the need for regular updates to reflect current laws and individual situations.
Estate Planning Among Art Collectors
Art collectors face unique challenges in estate planning, given art assets’ subjective value and illiquidity. It is estimated that only about 10% of ultra-high-net-worth individuals who are avid art collectors have adequately planned for the transfer of their collections. This lack of planning can lead to disputes among heirs or the mismanagement of the collection after the collector’s death
Overall Trends in Estate Planning
The 2024 Wills and Estate Planning Study by Caring.com found a 6% decline in estate planning overall, with a 16% decline among lower-income Americans. Interestingly, young adults aged 18-34 are the only age group whose rate of estate planning has not decreased, indicating a potential shift in attitudes towards estate planning among younger generations.
The Importance of Estate Planning
Estate planning is more than just a legal formality; it’s a strategic process that ensures your assets are distributed according to your wishes, providing financial security for your loved ones and avoiding potential family conflicts. For business owners, it’s about ensuring business continuity and protecting the company from disruptions. For art collectors, it's about preserving the value and integrity of their collections.
Minimizing Taxes and Preserving Legacy
Both groups must navigate complex tax landscapes. Effective estate planning can minimize estate taxes, capital gains taxes and gift taxes, ensuring that the maximum value of the assets is passed on to the beneficiaries. Moreover, estate planning allows individuals to preserve their legacy, ensuring their achievements and values are passed on to future generations.
Philanthropy and Estate Planning
Many business owners and art collectors have philanthropic goals. Estate planning facilitates these intentions, allowing for tax-efficient donations to charitable organizations and ensuring that their generosity continues to make an impact even after they’re gone.
Conclusion
The decline in estate planning among older Americans, business owners, and art collectors is concerning, given the critical role of estate planning in asset management and transfer. Business owners and art collectors face unique challenges that make regular updates to their estate plans essential. The trend of declining estate planning rates, especially among lower-income Americans, highlights the need for increased awareness and accessibility of estate planning services to ensure that individuals across all income levels and professions can effectively manage and transfer their assets according to their wishes. If you have not updated your estate plan or even created an estate plan, now is the time to take action.