As millennials navigate their way through life, they often prioritize experiences over long-term planning.

However, a significant shift is occurring as this generation finds itself on the cusp of inheriting substantial wealth from their parents and grandparents.

In this blog post, we explore the rising importance of estate planning for millennials, shedding light on the implications of unpreparedness and motivating them to take action for their financial well-being and that of their families.

The Growing Importance of Estate Planning for Millennials

With an estimated population of 72.24 million, Millennials emerged as the largest generational cohort in the United States in 2022.

Born between 1981 and 1996, this dynamic group has now surpassed Baby Boomers in size and is set to remain a significant and influential segment of the population for the foreseeable future.

With that said, millennials are starting to inherit wealth at an unprecedented rate. This is due to a number of factors, including the aging of the Baby Boomer generation and the rising cost of living.

However, many millennials are not prepared for this wealth. They may not have a will or other estate planning documents in place, and they may not be aware of the tax implications of inheriting assets.

This lack of planning can have serious consequences for millennials and their families.

For example, if a millennial dies without a will, their assets may be distributed according to state law, which may not be what they want.

Additionally, if a millennial inherits assets without a will (depending on the state they live), they may be responsible for paying estate taxes, which can be a significant financial burden.

In order to protect themselves and their families, millennials need to start thinking about estate planning.

The Inheritance Boom:

According to a study by Fidelity Investments, the transfer of wealth to millennials is set to reach unprecedented levels. A study by Fidelity Investments found that by 2050, an estimated $68 trillion will pass down from parents and grandparents, a substantial increase from the projected $20 trillion by 2020.

This vast wealth transfer presents millennials with unique opportunities and challenges, emphasizing the need for comprehensive estate planning.

The Alarming Lack of Preparedness in Estate Planning for Millennials

Despite the impending wealth transfer, many millennials are ill-prepared to handle the responsibilities that come with it.

Shockingly, only 35% of millennials have a will in place, and a mere 22% possess a power of attorney, as found by the National Endowment for Financial Education.

These essential estate planning documents hold the key to ensuring your wishes are honored and your loved ones are protected.

Consequences of Inaction for Millennials :

The consequences of neglecting estate planning can be severe, not only for millennials but also for their families.

Without a will, the distribution of assets becomes subject to intestacy laws, which may not align with your desires.

Moreover, the absence of a power of attorney can leave loved ones powerless when making financial and healthcare decisions on your behalf.

Taking proactive steps to secure your future today can spare your family from potential disputes, financial hardships, and emotional strain.

The Escalating Problem of Estate Planning for Millennials:

It’s important to acknowledge the challenges they face, such as heavy indebtedness and financial fragility. Now we will explore the role of estate planning for millennials to help strengthen their financial futures, overcome debt burdens, and secure their financial well-being.

All of the statistics below are from the National Endowment for Financial Education.

Financial Strengths: Millennials exhibit promising financial habits and behaviors. According to recent data, 88 percent of millennials are banked, demonstrating a high level of financial engagement. Additionally, over 40 percent own their homes, and more than half have a retirement account, showcasing their proactive approach toward long-term financial planning. Furthermore, a significant number of millennials (one-fourth) have investments in stocks, bonds, or mutual funds, reflecting their commitment to wealth accumulation.

Debt Burdens: Despite their financial strengths, millennials face significant debt challenges. A majority (53 percent) believe they have too much debt, and two-thirds carry at least one source of long-term debt, such as student loans, mortgages, or car loans. What’s more, a substantial portion (30 percent) grapple with multiple sources of long-term debt. Unpaid medical bills also pose a burden for over one-third of millennials. Moreover, a concerning trend is observed, with approximately 20 percent of millennials resorting to loans or hardship withdrawals from their retirement accounts, which can have long-term negative consequences.

Financial Satisfaction: Despite their efforts, many millennials do not feel satisfied with their current financial situations. Nearly one in five (18 percent) report being “not at all satisfied,” while only a small fraction (6 percent) express being “extremely satisfied.”

These sentiments highlight the need for proactive financial planning and strategies to improve overall financial well-being.

Financial Fragility: One of the pressing issues faced by millennials is financial fragility. A significant number (48 percent) would struggle to come up with $2,000 within 30 days in case of an unexpected financial need.

Additionally, less than one-third (32 percent) have set aside funds to cover three months of household expenses, leaving them vulnerable to economic shocks. Overdrafts on bank accounts are also a prevalent issue, affecting nearly 30 percent of millennials in the past year.

Empowering Action:

Now is the time for millennials to seize control of their financial futures through estate planning.

Here are some practical steps to get started:

1. Draft a Will: Establishing a will allows you to outline how your assets should be distributed and designate guardianship for minor children. It’s a crucial document that ensures your wishes are honored and your loved ones are protected.
2. Draft a Trust: Setting up a revocable living trust allows for the seamless transfer of assets, avoids probate, provides privacy, and allows for greater control and flexibility in managing and distributing assets during one’s lifetime and after passing.
3. Create a Power of Attorney: By appointing a trusted individual as your power of attorney, you grant them the authority to make important financial and healthcare decisions on your behalf if you become incapacitated.
4. Designate Beneficiaries: Ensure that your retirement accounts, life insurance policies, and other financial assets have designated beneficiaries. This streamlines the distribution process and bypasses probate.
5. Protect Your Digital Assets: In the digital age, it’s important to consider your online presence and digital assets. Make a list of your digital accounts and create instructions for their management or deletion after your passing.
6. Seek Professional Guidance: Estate planning can be complex, so it’s advisable to consult with an experienced estate planning attorney who can guide you through the process and ensure your plan aligns with your unique circumstances and goals.

Conclusion:

The growing wealth transfer to millennials brings both opportunities and responsibilities. By embracing estate planning, millennials can secure their financial futures, protect their loved ones, and leave a lasting legacy. Don’t let the lack of preparedness become a barrier—take action today and empower yourself to navigate the future with confidence.

Remember, estate planning is not just for the elderly or the ultra-wealthy—it’s for anyone who wishes to preserve and transer the things that matter most.