The Impact of Financial Literacy and Estate Planning on American Households

Date

2024-03-07

Authors

Solis, Oscar
Gallardo, Juan

Journal Title

Journal ISSN

Volume Title

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Abstract

Estate planning has been an emerging research area in financial planning, as it recognizes the importance of distributing assets and minimizing estate settlement costs at the time of a person's death. Individuals and families use estate planning as a financial tool to transfer wealth and provide for loved ones after a death in the family, which often prompts a loss of financial resources for those left behind. Financial planners and advisors who create estate plans for individuals and families should address the difficulties that often occur when an estate is settled. Dancy and Loe (2021) reported that the most vital estate planning documents for financial professionals to draft for a client are revocable trusts, powers of attorney, and wills. A will, in particular, can be absolutely critical, because it outlines an individual's wishes for the way that their estate should be managed after their death. The awareness about wills may have increased in the minds of many during the COVID-19 pandemic, underscoring the urgent need for estate planning. However, although research has highlighted the importance of wills, Kim and Stebbins (2021) noted that 63 percent of adults do not have a will. Given the heightened awareness of wills, this research seeks to understand the role that financial literacy plays in an individual's decision to establish a will and thus be prepared better for uncertain times. This poster provides an overview of how financial literacy and financial knowledge, and the application of both, contribute to individuals' estate planning practices, as seen in the 2021 National Financial Capability Study (NFCS) dataset. Further, the poster highlights the link between a person's level of financial literacy and whether or not they have established a will. As such, the poster offers important findings for financial services professionals who engage in estate planning with their clients.

Description

Estate planning has been an emerging research area in financial planning, as it recognizes the importance of distributing assets and minimizing estate settlement costs at the time of a person's death. Individuals and families use estate planning as a financial tool to transfer wealth and provide for loved ones after a death in the family, which often prompts a loss of financial resources for those left behind. Financial planners and advisors who create estate plans for individuals and families should address the difficulties that often occur when an estate is settled. Dancy and Loe (2021) reported that the most vital estate planning documents for financial professionals to draft for a client are revocable trusts, powers of attorney, and wills. A will, in particular, can be absolutely critical, because it outlines an individual's wishes for the way that their estate should be managed after their death. The awareness about wills may have increased in the minds of many during the COVID-19 pandemic, underscoring the urgent need for estate planning. However, although research has highlighted the importance of wills, Kim and Stebbins (2021) noted that 63 percent of adults do not have a will. Given the heightened awareness of wills, this research seeks to understand the role that financial literacy plays in an individual's decision to establish a will and thus be prepared better for uncertain times. This poster provides an overview of how financial literacy and financial knowledge, and the application of both, contribute to individuals' estate planning practices, as seen in the 2021 National Financial Capability Study (NFCS) dataset. Our study has 2,806 participants.

Keywords

2024 Faculty and Student Research Poster Session and Research Fair, West Texas A&M University, College of Business, Poster, Estate planning, Financial planning, Will

Citation