MW Looking forward to the great wealth transfer? Expect an $84 trillion mess instead.

By Beth Pinsker

Without proper estate planning, a lot of that money could end up going toward legal fees and taxes instead of to heirs

If you're counting on a piece of the $84 trillion in inherited wealth that's expected to change hands in the next 10 years, you might want to lower your expectations. Most of the people who intend to leave assets to their heirs or to charity haven't made a plan to do so yet, and they might even end up spending all their assets before they die. Your big inheritance is nearly as likely to be values and life lessons or a tchotchke from the mantelpiece than a house or a large sum of money.

According to a new survey from Trust & Will, the online estate-planning platform, almost one-fifth of people think they will leave nothing behind at all.

Some 23%, meanwhile, will likely leave behind a house or some other kind of property.

That's where the mess comes in.

While you can use beneficiary designations to pass along financial accounts after you die, you can't just pass along a house without making some sort of plan. At the very least, you need a will or a transfer-on-death deed, both of which require filing the proper papers with the proper authorities. If you want to make it easier, faster and less expensive for your heirs to inherit real property, a trust is the way to go.

Yet the key finding of the Trust & Will survey is that while 82% of Americans recognize the importance of estate planning, only 31% have an actual will. Only 11% have a trust of some kind. Some 55% have no estate-planning documents of any kind - among which Trust & Will lists power of attorney, healthcare proxies and living wills, along with trusts and wills.

The mess created by a lack of estate planning

What happens when you die and leave no plan? Your heirs have to go to court to sort out your affairs in a process called probate. This is a hard process to navigate on your own, so most people hire a lawyer. The process is public and can sometimes turn into a free-for-all featuring family fights or claims from creditors. The costs can range from $5,000 to hundreds of thousands of dollars, depending on the size of the estate - and the size of the fight.

Trust & Will founder Cody Barbo started his company seven years ago after watching his future wife go through a hard time when her father died, leaving behind a house, cars and a guitar collection that took three years to settle in probate. "I started to think, what's the lost opportunity cost of going through probate?" Barbo said. "I really wanted to home in on the educational part. Otherwise, you're just giving a percent of the estate to the government and the lawyers."

The rate of participation of around 30% has not budged, even after the online creation of hundreds of thousands of wills. For years, countless surveys have captured that same response rate, or close to it, and nothing seems to move it. The numbers go up for older age brackets, but not as much as they would need to in order to ensure smooth transfers of wealth. Trust & Will's new survey - its first without a sponsoring partner and also its largest, with 10,000 respondents - found that 66% of the Silent Generation, who are 80 and older, report having a will, but that the same is true for only 44% of baby boomers, most of whom are turning 65 in the next few years.

"We want to get that [total participation rate of] 30% up to 40% or 50%," said Barbo, but he noted that will take a lot of consumer education.

Last year, Barbo thought that a drastic change in the estate-tax threshold would move the needle in 2025. The current exemption of $14 million per person is set to expire at the end of the year and, if Congress doesn't act, it basically will get cut in half, affecting many more families. But Donald Trump's elect threw all of that up into the air. Barbo expects Congress to pass some sort of tax bill that will extend Trump's previous tax cuts for another period of time, but those who aren't so sure are holding off on their plans for now.

"I think that if we get to midyear or the third quarter of 2025 and we still haven't seen any action on this, unfortunately, estate planners will have no choice but to have clients move forward," said Tasha Dickinson, a trust and estate attorney based in Florida. "The problem is, estate-planning strategies require planning and time. We can't wait until Dec. 31."

Dickinson, who works with high-net-worth families, sees no chance that her clients will spend down their assets and leave nothing behind. They will be among the families handing down the bulk of that $84 trillion. But even those who have done estate planning could still face issues in passing down their wealth.

"You'd be shocked how many people set up trusts and pay $12,000 to get it done, and then they don't fund the trust, or they never execute the documents," said Barbo. "These families have wealth, and their assets end up in probate anyway."

For families with less wealth, healthcare spending and increased longevity could eat up a lot of their savings. The Trust & Will survey found that just over half of Americans think they will leave less than $50,000 behind, while 15% expect to leave no cash.

"The real wealth transfer is happening at the higher income levels," said Dickinson. "It's happening in real time and will continue to happen. That's why it's important for people to do estate planning."

Got a question about investing, how it fits into your overall financial plan and what strategies can help you make the most out of your money? You can write to me at beth.pinsker@marketwatch.com. Please put "Fix My Portfolio" in the subject line.

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-Beth Pinsker

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February 25, 2025 09:00 ET (14:00 GMT)

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