The growing number of childless Americans is a trend that's shaking up traditional estate planning. But who will care for them when they're gone?
As of 2018, around 15.2 million Americans aged 55 and above were childless, and this number is rising. A 2023 survey revealed that 47% of adults under 50 don't plan on having children, up from 37% in 2018. This shift in family dynamics is causing a ripple effect in wealth and estate planning, leaving experts with a pressing question: How do we ensure the well-being and wishes of these individuals are honored?
The Challenge of Childless Estate Planning
Estate planning typically revolves around the assumption of a next of kin, but what happens when there are no children to consider? Kelsey Simasko, an attorney, highlights the complexity: "It's one of the biggest issues in estate planning." She, herself, is among the millions of Americans without children.
And here's where it gets controversial: Only 19.9% of childfree adults have a will, compared to 32% of the general population. This gap in planning can lead to significant consequences.
The Risks of Inaction
Without proper planning, the wishes of childless individuals may remain unknown if they become incapacitated. Financial and personal health decisions could be left to strangers or courts, potentially leading to outcomes they wouldn't have chosen. Additionally, their estates may face lengthy and costly probate court proceedings, which can eat up a significant portion of their assets.
Interestingly, childfree couples are among the top wealth accumulators, with substantial net worths. Yet, many of them lack essential legal documents, including wills, trusts, and power of attorney (POA).
Pet Ownership and Childless Planning
While childless Americans may not have children, many have pets that require care. A survey revealed that 76.9% of childless Americans own pets, a higher percentage than the general population. This unique aspect of their lives should be considered in estate planning.
Finding a Solution
Childless individuals should start by identifying trusted friends or relatives to act as POA, executor, and trustee. Simasko suggests imagining a scenario and asking, "Who would come running?" If it's a sibling, they should be the first choice.
However, choosing a friend or a younger relative may be challenging, as these roles come with significant responsibilities. A thought-provoking question arises: What if you have no one you trust for these roles?
Estrangement is also on the rise, with 38% of American adults estranged from a family member, according to a YouGov poll. In such cases, professionals like attorneys, financial advisors, or trust banks can step in.
Organizations like Childfree Trust are filling this gap by offering services tailored to childless individuals and couples, becoming their 'next of kin' in a sense. Companies with trust practices, such as Plante Moran or Northern Trust, can also provide valuable assistance in financial planning and management.
Financial Planning for Childless Americans
Childless Americans should prioritize saving for retirement and long-term care, just like everyone else. Jay Zigmont, CEO of Childfree Trust, advises that while life insurance may not be necessary, disability and long-term care insurance are essential. Burial insurance is also recommended to cover funeral expenses.
Given the high percentage of pet ownership, naming a guardian for pets and allocating funds for their care in a will or pet trust is crucial. Childless individuals may also have more flexibility in spending their money, as they don't have the same inheritance considerations as those with children.
However, not all childless individuals are big spenders. Some may choose to leave their wealth to charities or extended family members. Without direct descendants, the concept of legacy takes on a new meaning, focusing on personal impact and philanthropy.
As the trend of childlessness continues to grow, the need for specialized estate planning services becomes increasingly vital. This evolving demographic shift presents a unique challenge and opportunity for the financial and legal industries.
