Academic journal article Financial Services Review

Will Adoption and Life Events among Older Adults

Academic journal article Financial Services Review

Will Adoption and Life Events among Older Adults

Article excerpt


This study examines the relation between life events and the adoption of wills among older adults using the 1996 and 2000 surveys of the Heath and Retirement Study. The results suggest that the adoption of wills and trusts is associated with four life events (i.e., becoming a widow, being diagnosed with cancer, retiring, and having a positive change in assets). Older adults experiencing these events appear to be taking financial planning actions; therefore, appropriate educational and marketing efforts targeting these individuals may be more effective, readily accepted, and more cost efficient compared to general outreach and marketing campaigns. © 2006 Academy of Financial Services. All rights reserved.

JEL classification: D14

Keywords: Life events; Estate planning; Will; Cancer

1. Introduction

The United States population continues to age and how people plan for the inevitable consequences of mortality is important to them, their families, friends, and communities. The older population controls much of the wealth held by households in the United States. Weiss (2003) suggests that a minimum estimate of the wealth that will be transferred to younger generations over the next five decades ranges from $10.4 trillion to $41 trillion (Havens & Schervish, 2003).

A fundamental document in estate planning is a will. A will contains information concerning the transfer of property, the naming of an executor, and the appointment of guardians for minor children (Bost, 2001). Through a will, an individual can ensure that when he or she dies, his or her wishes are carried out in a supervised manner.

For many, the transfer of personal belongings, facilitated through a will, represents a more significant transfer than large amounts of money. However, the non-financial possessions transferred are often highly valued and have the potential of creating significant and enduring conflict among family members (Stum, 2000; Stum & Goetting, 2002). When an individual dies without a will (also known as dying intestate) and has not made other arrangements, his or her estate is distributed according to his or her state's intestacy laws (Simon, Fellows & Rau, 1982).

Although a will is a basic estate-planning document, many current workers may not know the purpose of a will or feel that it is less important relative to other financial planning documents. Volpe, Chen & Liu (2006), using the results of a national survey of human resource and employee benefits administrators, found that among personal finance topics, estate planning topics were perceived as the least understood. However, respondents of the survey did identify a will as the most important estate-planning tool.

The lack of understanding about the importance of a will among the current workforce is reflected in the proportion of the population with a will. The proportion of the population with a current will varies significantly by age. The percentage of the total population that has a will ranges from approximately 42% to 46% and from less than 10% among young adults to more than 66% among those over 60 years old (Edwards, 1991; Lee, 2000; Schwartz, 1993; Simon et al., 1982; Rossi & Rossi, 1990). Lee (2000) also found that most of the older adults that did not have wills did not have will substitutes either, such as an established trust.

Several studies have examined the characteristics of those who have adopted wills. Previous studies on will adoption, however, have not examined how major life events that the individual experienced correlate with will adoption. The occurrence of stressful life events, or the anticipation of such events, may motivate the individual to take observable actions. Some stressful life events, such as being diagnosed with a terminal disease, may also cause the individual to anticipate additional end-of-life stressors. Some of these stressors may result from an uncertainty about how the individual's personal belongings and emotional artifacts will be distributed to others, or how the distribution of his or her belongings may lead to strife and conflict among family members and friends (Stum, 2000). …

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