Estate planning for the single person can be challenging. There are a lot of decisions that must be made and often making an estate plan is the last thing on a single person’s mind. While it may be tempting to ignore it, having a sound estate plan in place reduces stress and anxiety on survivors.
Understanding Intestate Laws
The American Bar Association reports that 55 percent of Americans die without a will, also known as ‘dying intestate.’ When a person dies intestate, their assets are distributed based on the applicable intestate succession laws in that state that correspond to the person’s marital status. The state receives the assets if there are no surviving relatives.
When a single person dies intestacy, the surviving parents and siblings as a rule inherit equal shares of the estate. If one parent is deceased, however, the surviving one inherits both shares. If a sibling died and is survived by descendants, their descendants inherit their share. If there are no surviving first-degree relatives, the estate is divided equally between the remaining family members.
Conversely, if a spouse dies intestacy, the surviving spouse inherits one-half of the estate and the children inherit the remaining half. If there are no children, the surviving spouse inherits the entire estate; if there is no surviving spouse, the children inherit the entire estate.
Setting Up Wills And Trusts
Wills and trusts are legal documents that ensure your wishes are carried out. There are three areas where estate planning for single people and married couples differ. Single individuals need to be careful when finalizing the following estate planning documents to ensure they meet their needs.
Note: Estate planning law varies by state.
- Beneficiaries. It is important to update your beneficiary designations within your will or trust. The individuals named as beneficiaries on financial paperwork like your life insurance and retirement policies inherit these benefits regardless of what your last will and testament says. You want the proceeds going to the right person.
- Estate Taxes. Married couples hold property jointly, unlike singles, and can leave it to the surviving spouse without paying estate taxes. A single person’s estate, however, can be hit with estate taxes if the value of the estate exceeds the federal estate tax exclusion. Because this has been rising, states have started imposing a state-level estate tax. So singles may want to consider setting up a trust that can help defer or reduce estate tax.
- Medical Power of Attorney. A medical power of attorney lets you appoint a designated agent to serve as your health care proxy and make decisions for you. According to state laws, your health care provider must certify that you cannot make your own medical decisions. A married couple commonly designates a spouse; a single person needs to designate a close friend or trusted family member.
Create a Living Will
A living will documents your wishes about your end-of-life medical treatment in case you become unable to do so. Choose someone you trust to make decisions for you in accordance with your wishes when you become too ill. If you don’t have a living will on file, not only your friends and family, but your medical team must decide what is in your best interest.
Often a living will and a durable power of attorney, which appoints a healthcare proxy to carry out the end-of-life treatment plan set out in your living will, are used together. State laws vary, but as a rule two physicians must attest that you are incapable of making your own medical decisions.
A living will is revocable any time.
Consider a Living Trust
A living trust is set up by you while you are still alive and is often used to help avoid probate, which is defined as “the court-supervised process of administering your estate and transferring your property at death” pursuant to the terms of your last will. The probate process differs between states, but may be expensive and time consuming.
A living trust places your assets in trust and your representative, or successor trustee, transfers them to your designated beneficiaries after your death. Because your assets never technically changed ownership (the trust continues to own the assets), then probate is typically avoided.
Living trusts also include last wills to protect assets that don’t enter into the trust, and together they are an effective strategy for conveying your instructions at the time of your death.
Estate planning for the single person is more complex than it is for married couples. Singles must take into account that without a partner they are placing decisions about disposal of their assets into someone else’s hands and trusting that that person will follow their instructions. It is important to draw up a will; otherwise, state law governs distributions of your assets and the state may not have your best interests at heart. If you have any questions about estate planning, consult an attorney in your state.