Posted On: JULY 2022
There’s a common misconception that only married couples with children need an estate plan. In fact, estate planning may be even more important for single people without children. Why? Because for married couples, the law makes certain assumptions about who should make financial or medical decisions on their behalf should they become incapacitated and who should inherit their property if they die.
Estate planning is still important for married couples to ensure that their wishes are carried out, but for single people who die or become incapacitated without a plan, undesirable consequences are far more likely.
Who’ll inherit your assets?
It’s critical for single people to execute a will that specifies how and to whom their assets should be distributed when they die. Although certain types of assets can pass to your intended recipient through beneficiary designations, absent a will, many types of assets will pass through the laws of intestate succession.
Those laws vary from state to state, but generally they provide for assets to go to the deceased’s spouse or children. For example, the law might provide that if someone dies intestate, half of the estate goes to his or her spouse and half to the children. If you’re single with no children, however, these laws set out rules for distributing your assets to your closest relatives, such as your parents or siblings. Or, if you have no living relatives, your assets may go to the state.
By preparing a will, you can ensure that your assets are distributed according to your wishes, whether it’s to family, friends or charitable organizations.
Who’ll make financial decisions on your behalf?
It’s a good idea to sign a durable power of attorney that appoints someone you trust to manage your investments, pay your bills, file your tax returns and otherwise make financial decisions should you become incapacitated. Although the law varies from state to state, typically, without a power of attorney, a court would have to appoint someone to make these decisions on your behalf. Not only will you have no say in who the court appoints, but the process can be costly and time consuming.
Who’ll make medical decisions on your behalf?
You should prepare a living will, a health care directive (also known as a medical power of attorney), or both to ensure that your wishes regarding medical care — particularly resuscitation and other extreme lifesaving measures — are carried out in the event you’re incapacitated. These documents can also appoint someone you trust to make medical decisions that aren’t expressly addressed.
Absent such instructions, the laws in some states allow a spouse, children or other “surrogates” to make these decisions. In the absence of a suitable surrogate, or in states without such a law, medical decisions are generally left to the judgment of health care professionals or court-appointed guardians.
How will you minimize gift and estate taxes?
When it comes to taxes, married couples have some big advantages. For example, they can opt to use their lifetime gift and estate exemptions (currently, $12.06 million per person). Also, the marital deduction allows spouses to transfer an unlimited amount of property to each other — either during life or at death — without triggering immediate gift or estate tax liabilities.
For single people with substantial assets, it’s important to consider employing trusts and other estate planning techniques that can be used to avoid, or at least defer, gift and estate taxes.
Don’t put it off
If you’re single and haven’t prepared an estate plan, don’t assume that you can put it off until you’re married with kids. Talk to us about basic documents you should put in place now to ensure your wishes are carried out should the unexpected happen.
© 2022