Disclaimer: The information below is only meant as an informational guideline. A will is a legal document, please consult a licensed and authorized professional before making any final decision.
Creating a will ensures that an individual’s wealth is distributed according to their wishes, preventing significant assets like a house from being divided among many heirs. However, many people, particularly lower-income households, do not have a will. This article explores whether specific incentives could encourage more people to write a will.
The Importance of Wills
Having a will is crucial for effective wealth transfer across generations. It prevents the dissipation of assets, such as a family home, among multiple heirs. Despite its benefits, the percentage of households with a will is surprisingly low. Among those aged 50 and older, less than half have a will, and the numbers are even lower for less wealthy and non-White households. This raises the question: Can targeted incentives increase the rate of will-writing?
Survey Overview
A recent study conducted by NORC at the University of Chicago aimed to answer this question through an online survey experiment. Participants were asked about their will status and reasons for having or not having a will. Those without a will were randomly assigned to one of four treatment groups to determine if various incentives could encourage them to write a will.
Survey Findings
The survey revealed that only 34 percent of respondents had a will. These individuals tended to be older, more educated, homeowners and had higher incomes. Most people who created a will did so in their 30s, 40s, or 50s, often motivated by having a child or experiencing the death of someone close to them.
Reasons for Not Having a Will
Among the 66 percent without a will, procrastination was the main reason—”I just haven’t got around to it yet.” Some individuals believed they had already taken care of bequests through named beneficiaries for financial assets like 401(k)s and life insurance. Others were generally confused about the process of writing a will.
Experimental Treatments
The experiment tested three different treatments:
- Mortgage Event: Offering the opportunity to establish a will with free legal and financial advice when signing for a mortgage.
- Mortgage Event with $500 Incentive: Adding a $500 incentive to the mortgage event.
- Bank Account Event: Offering the opportunity to establish a will with free legal and financial advice when opening a checking, savings, or investment account.
Results and Analysis
The results showed that linking will-writing to the mortgage process was ineffective and even counterproductive. The percentage of respondents intending to write a will dropped when it was associated with taking out a mortgage, even with the offer of free advice. Adding a $500 incentive only partially mitigated this adverse effect. In contrast, linking will-writing to a less stressful task, like opening a bank account, significantly increases the intention to write a will.
Impact of Individual Characteristics
The effectiveness of incentives varied by individual characteristics:
- Financial Sophistication: Those classified as more financially sophisticated (e.g., individuals who named beneficiaries for financial assets) responded positively to the $500 incentive. In contrast, less sophisticated individuals were more influenced by the change in setting.
- Homeownership: Homeowners were less affected by the change in setting than non-homeowners, who were more likely to write a will when linked to opening a bank account.
- Gender: Both genders were similarly affected by the treatments, showing a preference for less pressured settings over financial incentives.
Conclusion
Incentives may indeed increase the writing of wills, but the approach matters. Linking will-writing to a stressful event like taking out a mortgage is ineffective. A more effective strategy is associating will-writing with a more straightforward, less stressful task, such as opening a bank account. Additionally, financial incentives like offering $500 may be effective, but primarily for those already somewhat financially sophisticated. Ultimately, the setting and individual characteristics play significant roles in determining the success of these incentives.
Encouraging will-writing is particularly important for lower-income and non-White households, where the primary asset is often the family home. Effective interventions may help ensure that wealth is preserved and transferred according to the individual’s wishes, potentially helping to reduce the racial wealth gap.
To ensure your assets are distributed according to your wishes and to secure your family’s future, contact a trusted advisor today to discuss the importance of creating a will.
