2023 Trends – Most Californians need estate planning

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I sometimes hear “I don’t think I need estate planning; I don’t have an estate”. It is true that smaller estates can avoid probate without establishing a trust. Currently, in California, if your probate estate is worth $184,500 (2022) or less, you may be eligible for a streamlined procedure. You must petition the court using the “Small Estate Affidavit”. But, as the California Courts advise “Generally, though, deciding if you qualify for a simple procedure may be difficult. So talk to a lawyer if you are not sure.” The “Small Estate Affidavit” is only for the collection of personal property.

Californians Are Wealthier and Many Need Estate Planning

According to a report prepared by the Legislative Analyst’s Office and based on 2014-2016 data, Californians’ net worth totals over $6 trillion or about $160,000 per resident of any age. The state holds 17 percent of national net worth, while making up only 12 percent of the U.S. population. Based on the preceding average of $160,000 per resident alone, approximately half of the California population could profit from some type of estate planning, and everybody else needs at least a will. However, averages for the whole population are very misleading, and people nearing retirement age have accumulated a higher net worth and people just starting out may have negative net worth.  

Median Household Net Worth by Age in the US

On internet posts net worth values are often improperly reported and the definition and or age group may be missing, and you may be seeing widely disparate values, especially when people confuse mean with median. Here are the data we extracted directly from the US Census spreadsheet. The numbers are the median net worth for the United States per household by age of householder for the year 2019. While we do not have comparable data for California, the medians are going to be higher than the average for the US. The West has higher medians (all ages) ($ 172,000) than the Northeast ($ 151,300), the Midwest ($ 111,900), and the South ($ 91.260).

 

Age of Householder Median Net Worth in $ (United States)
Less than 35 years 15,700
35 to 44 years 83,150
55 to 64 years 203,900
65 years and over 268,700
65 to 69 years 266,400
70 to 74 years 305,100
75 and over 249,500
Median Household Net Worth by Age in the US – 2019 Census Data


High Net Worth Individuals (HNWI) and Estate Planning

Let’s now look at high net worth individuals (HNWI). These are arbitrarily defined as persons with liquid assets of $ 1 Million or more. In 2020, California had 1.14 million households with one million or more U.S. dollars in investible assets, this is approximately double the number of households in Texas (650,216). While the number of HNW individuals is lower than those for households, these numbers and those in the preceding paragraph show that estate planning should be a topic for much larger segments of the population than elsewhere in the United States.

Low Will Ownership Rates Importance of Estate Planning 

While we do not have specific numbers for California, the results of this 2022 survey can perhaps be extrapolated: More than 50% of Americans think that estate planning is at least somewhat important, but only 33% have a will or living trust. When asked why they do not have a will, 1 out of 3 respondents believes they do not have enough assets to leave behind. At least for Californians, and many others elsewhere, this is not true.

Let’s turn our attention to the actual client mix of estate planning attorneys across the United States. The chart based on 2022 data should dismiss the notion, still widely held, that estate planning is only for the rich.

Client Mix of Estate Planning Attorneys by Net Worth

Net Worth of Clients who work with Estate Planning Attorneys. Source: WealthCounsel.

As can be seen from the pie chart, 22 % of clients have estates valued at less than $ 500K and only 15 % of clients have estates valued at $ 5 M or more. Source: WealthCounsel 2022.

 

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