Black Americans tend to be less likely to have estate planning documents prepared compared to other racial groups.

Even though estate planning is crucial, financial experts argue that people often neglect it. They don’t consider it a top priority with life-changing potential.

According to Northwestern Mutual, only 33% of African Americans have discussed long-term care options and preferences with their parents. 

Additionally, just 31% of respondents have communicated their wishes regarding wills, inheritance issues, and other aspects of future estate plans.

The data indicates that the average Black American believes preparing a will is most appropriate around age 43. However, many financial advisers recommend starting the process when you turn 18.

There’s a lot on the line. Black Americans risk missing out on a $68 trillion transfer of wealth by 2047, in part due to inadequate estate planning. Additionally, according to CNBC, more than 70% of black Americans do not have a will.

Why Black American Wealth Won’t Trickle Down

Black Americans won’t benefit from a wealth transfer worth $68 trillion due to a lack of financial literacy and estate planning. 

Cerulli Associates’ analysis of ultra-high-net-worth markets reveals that by 2047, black adults will pass down trillions to younger generations. Nevertheless, because of the absence of estate planning, younger black generations may not experience the transfer of wealth.

People widely acknowledge that black Americans generally have less to pass down. Based on the Federal Reserve’s survey of consumer finances in 2019, white families had a median wealth of $188,200. On the other hand, black families had an average wealth of $24,100.

The Fed notes that black Americans typically don’t pass down what they have.

How Can Estate Planning Help?

Estate planning is crucial as it determines the distribution of an individual’s assets, such as homes, money, and possessions. 

The lack of an estate plan could result in significant financial consequences, leading to legal issues and family conflicts. However, having an estate plan, including a will or living trust, can mitigate these disputes before and after death.

Although many people avoid discussing their mortality, it’s an inevitable reality. Therefore, planning for it is crucial, mainly when preserving money or property within a family.

You can’t afford not to,” emphasized Portia Wood, an estate attorney in Los Angeles who specializes in assisting Latino, Black, and LGBTQ families. She concluded that the economic cost of inaction is simply too significant.

Wood highlighted two common misconceptions about wealth and estate planning. First, it’s only for the wealthy — next, they should postpone it until later in life. However, neither of these notions holds. Wood recommends that everyone over 18 have a plan and update it as life progresses.

Misconceptions About Estate Planning 

Dexter Wyckoff of Northwestern Mutual in Florida notes that, despite some strides, the black community lags in estate planning. 

Wyckoff observed that many individuals in their community believe that estate planning is solely for the affluent. He added that this misconception also extends to the value of seeking help from a financial advisor.

He emphasized that black individuals must understand that estate planning can be affordable. He further said that the community needs to know its relevance, not only in the event of a loved one’s passing. 

Furthermore, he asserts that these beliefs are misconceptions and contribute to the passing of black people’s generational wealth. Consequently, according to Wyckoff, little to no assets are left for children to inherit when someone dies. 

He suggests that breaking this cycle requires a combination of financial planning and estate planning. Wyckoff also stressed the importance of estate planning and its role in strengthening personal finance portfolios.