Why you shouldn't ignore the need for an estate plan

Everyone needs a will. The legal document lays out your wishes about how you would like your assets distributed at death and, if there are young children at home, documents your intentions about their guardian.

And it is critical to an estate plan, a grandiose sounding term for making a will, health care directive, power of attorney, listing beneficiaries on retirement savings plans, and other end-of-life documents. For those nearing their retirement years, the process of pulling together a will also helps you think about your values and your legacy.

Yet too many people ignore the need for a will and other estate plan documents. The percentage of people 70-plus with a will has declined from 72% in 2002 to 63% in 2018, according to the Center for Retirement Research at Boston College.

What happens if you die without a will? The distribution of assets at death is determined by state law.

Minnesota's rules are typical. The distribution of assets runs in this order: your spouse and/or your children; parents; siblings; nieces and nephews; grandparents; aunts and uncles; and cousins.

Most people are reasonably comfortable with this priority list. Nevertheless, there are still good reasons for creating a will that expresses your intentions.

"A will is necessary if you want to leave property to a friend or a charity, to give certain items to certain people, or to leave someone out who would otherwise inherit from you," according to information posted at the Minnesota Attorney General's Office. "You may also wish to appoint a specific person to handle your estate. Thus, often it is best to write a will so your intentions can be met."

A will hikes the odds of leaving at least something behind to heirs, too. That's one conclusion from the scholarly paper "Wills, Wealth, and Race" from the Center for Retirement Research at Boston College.

The analysis shows that the odds of dying without a will are especially high among Black and Hispanic individuals (after controlling for demographic and socioeconomic characteristics). The scholars also find that these individuals are less likely to leave bequests of meaningful size.

But, they add the evidence is compelling that having a will increases the likelihood of reaching bequest goals "either by preserving value postmortem or by shifting behavior throughout life, such as lowering consumption to guarantee bequest goals are met."

A will is well worth the effort to pull together and, if you don't have one, get one as soon as practical.

Chris Farrell is senior economics contributor, "Marketplace"; commentator, Minnesota Public Radio.