Estate Planning

Americans Reveal Deep Misconceptions About Estate Planning

Most Americans don’t have a will, but interest is now on the rise

A new survey from Policygenius reveals how the pandemic has altered many Americans thoughts on the importance of having a will.

NEW YORK, Dec. 2, 2020 /PRNewswire/ — Lack of understanding around estate planning may be leading Americans to avoid getting a will, even as interest is on the rise due to the global pandemic, according to a new survey from financial services leader Policygenius. The survey found that a majority of people (60.4%) did not have a will, but that may be about to change. Nearly 40% of survey respondents (39.7%) said they feel it’s more important to get a will because of the COVID-19 pandemic, which has had a devastating impact on almost every facet of American life this year.

Planning Avoidance?

However, many respondents also held misconceptions about the process of creating a will that may be leading them to avoid estate planning. The survey found that more than one in five respondents (22.8%) who think getting a will is too expensive overestimated the cost of securing a will by hundreds or even thousands of dollars. Additionally, nearly half (48.2%) of respondents incorrectly believed that their possessions would automatically pass to their spouse if they passed away without a will, suggesting that people may not be creating wills because they assume they don’t need them.

Time was also a barrier for respondents, particularly those with families. About one in four people (24.1%) said they don’t have a will because they haven’t had time to put one together, and more than half of those respondents (62%) were parents.

“Estate planning can feel like a complex or time-consuming effort, but for the average American family, it’s usually more straightforward than expected,” Jennifer Fitzgerald, CEO and co-founder of Policygenius, said. “It’s difficult to overstate the importance of estate planning as a way to secure financial peace of mind and make sure your family is taken care of, especially in what’s been a very challenging year for many.”

The Policygenius Estate Planning Survey also found:

  • Respondents prioritized family, with more than one in three respondents (35.9%) saying that having a child is the most important life event for someone if they want to create a will.
  • Nearly two-thirds (65.5%) of respondents cited making the process of inheritance as easy as possible as one of their top three important issues when getting a will.
  • Only 39.3% of respondents knew that if someone passes away without a will, a court will determine who gets their belongings.

Excerpts From The Survey:

Why do people create an estate plan?

The top reasons for creating an estate plan are:

  • Providing for my family financially (76.3%)
  • Making the process of inheritance as easy as possible after I’m gone (65.5%)
  • Having someone to look after my kids (36.8%)
  • Leaving a lasting legacy (accomplishing great things, being remembered as a good person, etc.) (29.4%)
  • Avoiding the estate tax (26.1%)
  • Finding inner peace (24.8%)
  • Keeping the details of my money and property private (22.6%)
  • Donating to charity or causes I support (18.6%)

They Don’t Have Anything Valuable To Pass On

The most common reason Americans don’t have an estate plan is a perceived lack of valuable assets.
A will is still an important estate planning tool, even if you don’t own anything particularly valuable — a will can pass on sentimental belongings and personal property and can name a guardian for minor children. Moreover, many people who say they have nothing valuable to pass down actually predict they’ll leave behind sizable estates.

They Think Their Spouse Will Get Everything

A fair number of respondents also believe that everything will go to their spouse, which is only partially true. This was the top reason cited for not getting a will by male respondents (28.6% of men chose this answer compared to 16.6% of women). Men may be more confident in their ability to cover their finances, according to Hanna Horvath, personal finance expert at Policygenius. Since men are traditionally the provider in their families and typically die earlier, they are more likely to have a financial goal of leaving money to their spouse.

It's difficult to overstate the importance of estate planning as a way to secure financial peace of mind and make sure your family is taken care of, especially in what's been a very challenging year for many...

If you die without a will, you will have died intestate, and the state will determine who receives your intestate estate — depending on your state and who survives you, a portion of your assets may actually be set aside specifically for your children, including children from someone other than your surviving spouse. Some of your assets may need to be sold off to pay creditors or lienholders.

Americans Don’t Understand Estate Law Or How Probate Works

An overwhelming majority of people don’t know what happens to their estate when they die. Respondents who had a will were only slightly more knowledgeable than respondents who didn’t have a will.

A court determines who gets your belongings during probate. Without a will, the court will rely on your state’s laws of intestacy, and this could inadvertently leave loved ones without an inheritance. Not all next-of-kin have an equal claim to the estate, as almost 19% of respondents believe; typically, the closer blood relatives, like lineal descendants (children and grandchildren) have a greater claim to your assets when you die without an estate plan. Nearly half believe that a spouse would automatically get their belongings. As mentioned before, a spouse may not always be entitled to receive all of the deceased’s assets.

Confusion About The Estate Tax

Over a quarter (26.1%) of respondents stated that the main objective of their estate plan was to avoid the estate tax. However, further analysis reveals that very few of these respondents would actually be required to pay it. A federal estate tax is levied only on estates worth over $11.58 million in 2020 (increasing to $11.7 next year), and while a handful of states levy their own estate tax, the lowest exemption limit is $1 million.

The vast majority of Americans are worried about the tax without reason : 81.0% of respondents concerned about paying estate tax expect to die with an estate worth less than $1 million, which means their estate won’t be responsible for paying it.

Policygenius’ survey is based on responses from a nationally representative sample of 2,689 Americans ages 25 and over. It was conducted by SurveyMonkey from July 16 through July 17, 2020.

You can read the full report here.

Digitizing The Process

Earlier this year, Policygenius announced the launch of a mobile app that enables consumers to create wills and trusts conveniently on their phones. To assist customers who feel they don’t have time to make a will, the Policygenius app breaks down the estate planning process into small, manageable steps that take five to 15 minutes each. Each step is also accompanied by educational content to help consumers understand the process and counter confusion. Consumers can also shop for life and home insurance from the app, creating a mobile one-stop shop for key financial protection needs.

“We launched our estate planning service this year as a way to digitize and demystify the process of getting a will, just as we’ve done with insurance,” Fitzgerald said. “It’s clear there’s a need for greater convenience and education when it comes to estate planning, and we’re thrilled to bring our strengths in those areas to wills and trusts. As we continue to grow, we’re looking forward to continuing our mission of helping consumers get financial protection right.”

 

 

 

About Policygenius:
Policygenius is the nation’s leading online insurance marketplace, with headquarters in New York City and Durham, North Carolina. We’ve helped more than 30 million people shop for all types of insurance like they shop for everything else — online — and have placed over $60 billion in coverage. Policygenius launched in 2014 and is one of the early insurtech pioneers. Policygenius launched wills and trusts through a new mobile app in 2020. Policygenius was named to Forbes’ list of Best Startup Employers (2020), Crain’s Fast 50 (2019) and Inc. Magazine’s Best Workplaces (2018, 2019, 2020).

 

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