Millennials have already lived through a lot. Many grew up in the aftermath of 9/11 only to start adulthood during the Great Recession. Only a decade later, they’re dealing with a world full of divisive and polarized politics, a global pandemic, and another round of serious economic upheaval.
While Baby Boomers and Generation X also had to live through all of this, they didn’t have to grow up in it. A much different youth means different ways of doing things for Millennials, including how they handle (or even use) estate planning.
Are Millennials Using Estate Planning?
Research indicates that approximately 60 percent of American adults don’t have wills filed to be executed in the event of their death. Rates can be even lower for young adults who still expect to be around for a long time. In fact, nearly 80 percent of Millennials don’t have even basic estate plans laid out.
One thing Millennials are doing is buying homes, particularly in the suburbs of many cities. Estate planning is a crucial security move to make when owning a home, but most members of this digital-age generation aren’t doing it yet.
How Are Millennials Handling Estate Planning?
Among Millennials that are choosing to go through estate planning, there are three primary ways they are going about it:
• Will: This is the choice of 78 percent of those reporting their actions.
• Trust: Only 16 percent of Millennials surveyed are using this method of estate planning.
• Appointment of Guardianship: This method is used rarely by only 6 percent of those surveyed.
The prevalence of wills isn’t really surprising to industry experts. Wills are definitely more well-known than other kinds of documents for estate planning. Also, three in four Millennials surveyed reported having kids, and wills allow them more control over their final arrangements and distribution of assets.
Why are Millennials going through estate planning?
• Having kids was the primary reason reported by more than one-third of respondents.
• The global pandemic was the second-biggest driver at 17 percent.
• Buying a home was only listed by 6 percent of the survey respondents.
Should Millennials Use Estate Planning?
Many Millennials assume that estate planning is just something old and rich people do. The assumptions are often that:
- Only the rich need to do it
- Only the rich can afford it
- Only those closer to death should look into it
In many cases, all of these assumptions are in error.
The costs of estate planning have come way down over the years. Also, as the global pandemic has proven to many, people don’t know how long they have to live.
Regardless of someone’s age or wealth status, anyone that has possessions that would need to be passed on after their own demise should go about estate planning in order to:
- Establish a process for the distribution of their assets
- Manage tax planning in advance to preserve as much wealth as possible
- Decide who gets what
- Decide who gets how much
The social unrest of 2020 made an impact on many Millennials. Even those without kids or spouses to pass things onto are sometimes using estate planning to donate their possessions, property, and money to social causes they believe in, be it Black Lives Matter, environmental concerns, or many other various causes.
Estate planning is especially crucial for someone who owns a home. In the event of something unexpected, a home included in estate planning can be appropriately transferred to someone they love. This process can be efficient and relatively straightforward.
On the other hand, a home not included in an estate plan will wind up going through a probate process. State laws vary, but two years is a good average before ownership is finally awarded to the surviving loved one.
Consider California, for instance. In order to avoid going through probate court, the asset value cap is listed at $166,250, at the time of writing. Most homes in this state far exceed this particular value.
When probate proceedings happen, they consider the full market value of a home. If you have a home worth $1 million but has $800,000 in mortgage remaining, the probate estate has the $1 million value instead of $200,000 in equity. Several years of legal complications can ensue from going through a probate process, which Morgan Law Group can help with. Alternatively, the simpler route is using a good law firm to create estate planning to avoid this in the first place.