Black Americans are missing out on a $68 trillion wealth transfer due to a significant lack of estate planning and financial literacy.
According to Finurah, an analysis of high and ultra-high net worth markets conducted by the consulting group Cerulli Associates, shows by 2047, trillions of dollars will be passed down to younger generations. However, due to the lack of estate planning in Black America, younger Black generations may not see wealth trickle down.
It’s no secret that Black Americans have less to pass down in general. White families had a median wealth of $188,200 while Black families have a median wealth of $24,100 according to the Federal Reserve’s 2019 survey of consumer finances. The Fed says Black Americans typically don’t pass down what they do have.
Finance experts are now urging Black Americans to do estate planning, the process of designating who gets a person’s possessions after they pass away. This includes cars, cash, real estate, and investments. When people don’t do estate planning before they pass, their possessions become subject to local and state laws as well as family infighting.
Although many avoid talking about their death, it’s inevitable, so planning for it is essential, especially when it comes to keeping money or property in a family.
“You can’t afford not to,” Portia Wood, a Los Angeles-based estate attorney who focuses on Black, Latino, and LGBTQ families, told Finurah. “The economic cost is just too great to do nothing.”
Wood added that two common misconceptions of wealth and estate planning are that it’s something you should only do if you’re rich, and it’s something that should be done later in life, but neither is true. Wood suggests everyone over the age of 18 have a plan and update it as life continues.
NerdWallet has a seven-step guide to wealth and estate planning for those who may not have experience in the area. The first step in wealth and estate planning is taking inventory of your tangible (real estate, vehicles, and collectibles) assets and intangible (stock and bonds, retirement plans and life insurance policies).
One of the reasons estate and wealth planning is so uncommon among Black Americans is they aren’t exposed to financial education. The 2021 TIAA Institute-GFLEC Personal Finance Index shows Black Americans answered an average of 38% of the study’s financial literacy questions correctly. Meanwhile, white Americans answered 55% of the questions correctly.