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A Brief History of Estate Planning in America

In this guide, we break down the history of estate planning in America and how it’s continually evolving today.

The 4th of July holiday commemorates the momentous day in 1776 when the U.S. became free and independent from England. This country was founded upon the principles of freedom, liberty, and the right to individual ownership. These principles are very much what make estate planning possible. Believe it or not, we were not always at liberty to distribute property based on our own wishes. In the spirit of our Day of Independence, let’s take a brief look at the history of estate planning in our country. You might be surprised to find out what a long and winding history it is!

The Beginning: Ancient History

First, let’s rewind to the times in which we developed our estate planning roots. In the ancient world, property was owned collectively by a tribe or a family. When a tribe’s leader died, the property was passed along based on what the tribe’s customs prescribed. 

Interestingly, this is not dissimilar to the way an estate is distributed today, when an individual passes away without a Will. This is called “intestacy,” and that individual’s property is distributed per that state’s intestacy laws.

The first formal laws related to estate planning can be found in ancient Rome and England. In 6th century Rome, the Justianian Code recognized both written and oral wills, as long as they were approved by an official. Around the same time in England, land transfers were allowed at the approval of royalty. 

In the 12th century, property began to be passed automatically to the oldest son, without the need for outside approval. Finally, in the 16th century, land owners were allowed to pass their property on to whomever they choose. 

This history is what provided the basis for the estate planning that we’re familiar with today.

Estate Planning History in the U.S. 

The history of estate planning in the U.S. can be traced back to the Stamp Act of 1797. This was an estate tax that helped fund the Navy during a time when the U.S. had tensions with France. The tax was then repealed in 1802. It was reenacted twice more to help fund the Civil War and the Spanish-American War.  

The estate tax as we know it today, more or less, was reenacted a final time in 1916 to help fund World War I. Individuals started figuring out that they could bypass the estate tax by gifting their estates to family members. In 1924, the government countered this strategy by enacting the gift tax. Later, the Tax Reform Act of 1976 consolidated the estate and gift tax into the same tax schedule. Prior to this, the two taxes were treated separately, which created administrative difficulty. 

It’s interesting to note that in our founding history, the estate tax was levied specifically to fund wars. Once the war was over, the tax would be repealed. However, after World War I, the estate tax was here to stay. 

There’s also a history lesson if you look at the numbers. In 1916, the estate tax exclusion amount was $50,000. This means that, at the time, any estates valued at less than $50,000 were not subject to federal estate taxes. The exemption amount is adjusted for inflation each year; it reached $1 million in 2002, and is now at $11.7 million. Although the change may feel gradual, the numbers are quite astonishing if you compare them to what they once were. The estates that are subject to federal taxes currently represent America’s wealthiest 1%. 

Estate Planning Continues to Evolve

The history of the estate plan is far from being finalized. Just recently, the Biden administration released the Green Book, which revealed a plan to increase the top tax rates, and to assess capital gains tax at the time of death or transfer, instead of the time of sale. Estate planning continues to be revised and reshaped, especially when a new administration is elected into office.

It’s also important to recognize that there was a time in our history when women, Black, Indigenous and People of Color (BIPOC), and members of the LGBTQIA+ community were excluded from the right to own or inherit property. These marginalized groups were denied generational wealth, which still feeds into the wealth gap today. 

This shameful history feeds into the perception that estate planning is only beneficial for a small group of Americans. However, anyone has the equal right to create a strong estate plan to help protect themselves and their loved ones. Trust & Will is actively disrupting the estate planning industry to help dismantle outdated perceptions and increase accessibility. 

Creating Access & Education with the help of Technology

At Trust & Will, we’ve made it our mission to provide education on how estate planning is beneficial to absolutely everyone. We want to dismantle the belief that having a Trust or a Will only makes sense for wealthier or older individuals. Anyone can and should have an estate plan. It’s a powerful tool that pertains to so much more than just the transfer of property. 

Thanks to technology, we’re able to provide estate planning services that are easy, affordable, and accessible to everyone. We’re even on the frontier of enabling eWills in every state. By removing barriers, real or perceptual, our hope is that every American will have at least a basic Will in place to help protect themselves and their loved ones. If you’re curious, find out how you can create an online Will in just 15 minutes, all from the comfort of your home. 

Is there a question here we didn’t answer? Reach out to us today or Chat with a live member support representative!