Estate planning is not just for the wealthy—it's a vital step for anyone who wants to keep their financial affairs in order. It involves arranging who will receive and handle your assets and responsibilities after you pass away or become incapable of managing them yourself. Without a solid estate plan, the fate of your hard-earned assets and your family's financial security may be uncertain.

Engaging a knowledgeable financial planner when setting up your estate plan can help you work through the complexities easily and give you the invaluable peace of mind that comes from knowing your loved ones will be taken care of according to your wishes.

The Waning Trend of Wills: What Are the Implications?

A concerning truth is that fewer older Americans are crafting their last will and testament, a trend affirmed by Gal Wettstein, a senior research economist at Boston College: “Fewer older Americans are writing wills, a finding that could spell trouble for survivors. We looked at who’s not writing wills, and it’s disproportionately non-Hispanic Blacks and Hispanics.” Wettstein reflects on the tendency to procrastinate on this important task, “It does seem that there’s a tendency to put off writing a will. I think it’s an unpleasant process, even in the best conditions.”

As of 2024, Caring.com reported only 32% of Americans have an estate plan in place, a 6% decline from the previous year. One reason behind this decline is the common misconception that estate planning is only necessary for wealthy individuals. 40% of Americans who do not have a will said they believe they do not possess enough assets to warrant having one.

Adding to the decline is the lack of conversation and awareness. According to survey results, over half of adult children are unaware of the location of their parent's estate documents and have little information about them. This lack of awareness and preparation can lead to conflicts and complications in the future. Therefore, it is essential to promote more transparent communication and educate people about the significance and accessibility of estate planning for everyone.

The Psychological and Emotional Side

Andy Cohen, CEO of Caring.com, emphasizes the potential consequences of neglecting estate planning for families. “People don’t want to think about end-of-life issues, but the human condition is that everyone is going to pass away. The consequences of not dealing with that are a real mess for the family," says Andy.

Recognizing estate planning as a form of self-expression can help mitigate these emotional barriers. According to a study, 73% of individuals view wealth transfer as reflecting their values and beliefs, highlighting the personal significance and emotional benefits of estate planning.

Seeking professional guidance when developing your estate plan can be incredibly valuable. Working with financial advisors can significantly reduce stress related to estate planning. 83% of people who work with financial professionals feel less stressed.

Crafting Your Estate Plan Using Wills and Trusts

Estate transitions, unless guided by an estate plan, are governed by state law. This process may not align with your wishes, leading to conflicts and stress for your loved ones. Having an estate plan in place is vital to ensure that your assets are distributed according to your wishes and to minimize the burden on your loved ones.

Each year, Americans spend an enormous $2 billion on probate, a court process used to manage a person's estate after they pass away. This highlights the significant amount of time and money involved in resolving financial matters without a well-defined and efficient estate plan.

Understanding how to use wills and trusts when considering future financial security for your loved ones is essential. Each serves a unique purpose in estate planning, ensuring your assets are managed and distributed according to your wishes and that your loved ones are taken care of after you're gone.

1. Wills: Your Last Word on Personal Affairs

A will is a foundational legal document that comes into play after your death, instructing how you want your assets distributed and who will be in charge of the process. It goes through an evaluation in probate court, which, although public and sometimes lengthy, validates your last will and testament. An executor, whom you name, carries out detailed instructions, covering everything from guardian appointments for minor children to final funeral wishes—key to preventing potential disputes among survivors.

2. Trusts: Managing Assets for Today and Tomorrow

Trusts are customizable legal arrangements that serve as a vessel for your assets. Active during your lifetime or after, trusts appoint a trustee—a fiduciary bound by duty—to manage and distribute assets for your beneficiaries based on your directions.

Trusts can be either revocable or irrevocable. Revocable trusts can be changed anytime, which provides flexibility and control over assets. However, these trusts are included in your taxable estate as you still retain ownership rights. On the other hand, irrevocable trusts remove your ownership and control, allowing assets to bypass the taxable estate and potentially shield them from creditors.

Will or Trust—Which Is Best for Your Estate?

Deciding whether to include a will, a trust, or both in your estate plans depends on several factors, such as the size of your estate and privacy concerns. A will ensures that your wishes are honored after your death, while a trust can offer immediate and continuous benefits to your beneficiaries. This decision is subject to change based on your life circumstances and state laws. 

One of the most common mistakes people make in estate planning is assuming that wills and trusts are the same or can be used interchangeably. However, they serve different purposes and can be used together to achieve specific goals. For example, establishing a trust within a will can help protect minor children's inheritance until they reach legal age. Another mistake to avoid is treating estate planning as a one-time event rather than an ongoing strategy that can be adapted throughout one's life.

Crafting an estate plan that includes the right mix of wills and trusts aligns with your desires and the needs of those you care for. It's a service to your future and a safeguard against the unpredictability of life. Whether you decide on a will, a trust, or a combination of both, consulting financial and legal experts ensures your estate avoids probate pains and your legacy is preserved as you intended.

Ensuring Your Directions Are Clear

Estate planning is an ongoing process that evolves with life's changes. Regularly updating your will or trust can help sidestep common estate planning mistakes, like outdated beneficiary designations or incomplete living wills. Planning ensures that you transfer assets to your chosen beneficiaries and that final medical and life decisions reflect your values and wishes.

Having a clear and detailed will is vital to avoid family conflicts, especially if your family situation is complicated. It's best to work with a professional financial advisor who specializes in estate planning to handle the complex aspects of estate taxes, legal issues, and personal decisions involved in the process.

Trusts are a great way to keep your affairs private and streamline the process, and naming beneficiaries directly on accounts can also be a simple way to pass on assets. Each choice you make impacts how your estate is handled after you're gone, whether in terms of probate, taxes, or the rights of those you leave behind.

The Aligned Perspective: Estate Planning Strategies

It is concerning that fewer people are making estate plans. Without a plan, families may face challenging financial problems and legal issues. Estate planning ensures that your hard-earned assets, including your house and other possessions, go to the right hands after your passing. It also helps manage estate and inheritance taxes in the most efficient way possible. Furthermore, having a plan can give you peace of mind, knowing that your loved ones won't have to deal with headaches related to your bank accounts, home, and other physical assets later. Establishing a plan now is better than scrambling during difficult times. Consider teaming up with a financial advisor who can guide you. Remember, the right plan today can be a lifesaver for your family tomorrow.