Estate Planning

About 70 percent of Americans die without a will. Those who make a will tend to have certain characteristics in common. According to information from an experimental module of the 1994 Asset and Health Dynamics Among the Oldest Old (AHEAD), higher education and greater wealth increase the probability of having a will. In addition, those who consulted a financial advisor, participated in 100 hours or more of volunteer work in the previous year, or donated more than $500 to religious or charitable organizations in the previous year are more likely to have a will. White households are more likely to have a will than African-American, Hispanic, and other racial groups.

A will is not an estate plan. A will is only one component of a complete estate plan. More sophisticated estate plans usually rely on a combination of estate planning techniques, including a will and trusts, in order to achieve desired objectives. Wills must be carefully coordinated with other estate planning techniques, as there are some things a will cannot do. A will cannot transfer property that is transferred by trusts, title, or contract (will substitutes), so the will must be carefully coordinated with these. A will cannot meet the needs of a person who is incapacitated, but not yet deceased. According to the Mayo Clinic and the Harvard Medical School, a sixty-five-year-old person has at least one chance in four of needing an average of two and one-half years of long-term care. As a result, estate planning often involves the use of advance directives—written legal documents that declare an individual's wishes concerning how certain physical and financial matters will be handled, if and when the person loses the capacity to make decisions.

Examples of advance directives are the durable health care power of attorney, the living will, the durable power of attorney (for financial matters), and revocable living trusts. Durable powers of attorney are called durable because they continue in effect after the onset of incapacity. Conformity to the legal formalities set forth in applicable state law is particularly important relative to advance directives. Finally, a comprehensive estate plan will find a way to communicate important information that doesn't belong in a will and should be shared with appropriate individuals, such as one's personal representative, before death. A letter of last instructions is one way that an individual can communicate his or her feelings about important matters such as funeral instructions and organ donation. The wishes of surviving family members in regard to these matters may be decisive unless the decedent clearly expressed his or her wishes in writing.