When we think of estate planning, we often think of married couples with children who want to make sure that their assets are passed on in a way most beneficial to their spouse or children and grandchildren. Certainly, these are important considerations for estate planning, however, the need for an estate plan doesn’t solely apply to those who have spouses or children. In fact, for single individuals without children, having an estate plan in place is still very important.
Why? Because there is one entity that cares very much about every person who passes, your state. Every state has its own default plan for how assets are distributed after death, known as “state probate law.” Here’s where this becomes especially relevant for single individuals without children. Most state probate laws assume assets will pass first to a surviving spouse, then to children or grandchildren. If none of those exist, the state follows a preset hierarchy. The order can vary by state, but generally, the state will assign the assets to other family members, starting with siblings and their descendants, then parents, grandparents, aunts or uncles, and then extended relatives. Non-marital partners are typically not included. Further, if no family members can be located, the state may ultimately retain the assets under a legal principle know as escheatment.
An Estate Plan Right for You
Rather than leaving such important matters to chance or to the state, it’s far better to have a plan in place that directs your assets in a way that aligns with your priorities, values, and relationships. Even if you don’t believe your estate is “large enough” to warrant planning, you should exercise control over its disposition. It’s also important to remember that estate planning isn’t only about what happens after one passes. Your estate plan should also address your wishes about who will make important medical and financial decisions on your behalf if an accident or illness renders you unable to make these decisions for yourself.
The good news is that estate planning doesn’t have to be all that complicated. Let’s look at some basic elements that everyone should consider, regardless of marital and family status.
- Will. Most of us are familiar with what a will does: it stipulates how you want your property and other affairs handled in the event of your death. Remember that your estate consists of everything you own, including cash, securities, real estate, business interests, collectibles, vehicles, furniture, and everything else. All of this has value, and the terms of your will determine where those assets go, rather than relying on state rules.
- Durable power of attorney. This estate planning document stipulates who is authorized to make decisions for you in the event you are unable to make decisions for yourself, either temporarily or permanently. Unlike a will, a durable power of attorney (POA) takes effect while you are still living, but unable to direct your own affairs. The holder of a POA can pay your bills, make sure your tax return is filed, and perform other important required tasks that you would be unable to do if incapacitated. Especially for single persons, it is vital to appoint a trustworthy person of your choosing; otherwise, the state will appoint someone to act on your behalf—and it may not be someone whom you would have chosen.
- Advance medical directive. Similar to a POA, but applying specifically to medical decisions, an advance directive (sometimes called a “living will”) specifies what types of treatment you do or do not want, in the event you become incapacitated and unable to direct your own care. The person you appoint to hold your advance directive can consent or not consent to care on your behalf. This matters, because without an advance medical directive, physicians and caregivers must wait until the court appoints a guardian or makes their own judgment, which may not align with your wishes. An advance directive allows you to decide in advance for yourself, thus putting you in control.
- Appointing an executor. The executor is the person or entity entrusted with seeing that the terms of your will are carried out as specified. This is a position of trust, so you’ll want to choose someone whom you believe will deal fairly with all parties while making sure your wishes are upheld. An executor can be a friend or family member, an attorney, or a business entity such as the trust department of a bank. Before the will is drafted, you should talk with your intended executor to make sure that they agree to serve in this capacity.
The executor need not be the same person you appoint to hold your POA and advance directive. In fact, it may make more sense to have these roles assigned to different people based on their strengths. For example, someone who is financially savvy may be well-suited to hold your POA. Similarly, if you know someone in the medical field, you may want them to hold your advance directive.
While it is always recommended to have your estate planning documents prepared by a qualified legal professional, thinking through these decisions ahead of time can alleviate stress when you are ready to work on your estate plan.
At The Planning Center, we believe that everyone should have the opportunity to make informed decisions regarding their estate and other important financial matters. Our fiduciary obligation ensures that our guidance is always delivered with the client’s best interests foremost.
