Historically, the emphasis on estate planning has been for individuals with spouses and children, often overlooking the single persons among us - despite being equally important. Whether you’ve never married or you’re divorced or widowed, singles need to pay just as much attention to their estate planning as married folks. More importantly, single people face unique estate planning issues that require advanced planning, time, and the help of an experienced professional to sort through the details.
If you’re single and own a house or have non-beneficiary driven assets worth more than $150,000, you should absolutely consider a living trust because without one, your surviving loved ones could feel the sting. Within the state of California, you may distribute assets worth under $150,000 without a living trust, therefore, anything you own over $150,000 in assets needs to be placed in a living trust. This does not include your beneficiary-driven assets, such as life insurance, 401(k), annuities, or IRAs since these accounts already have named beneficiaries. How these varying assets are titled, and how the beneficiary designations are prepared, will directly impact who will gain control of the assets and how they’ll be distributed upon your death. If you die without a will or trust, possessions are distributed according to the laws of your state – which can create additional stress for those you leave behind. For a single person, the default under state law usually provides that assets are passed on to their closest relatives such as a parent, child, or sibling. And, if there are no relatives alive, the assets may go to the state.
With a living trust, you have the peace of mind to specify beneficiaries, contingent beneficiaries, and charities who will receive portions of your estate. Given this information, it makes sense to begin the process of creating a living trust as soon as possible. And yes, there is a great deal to consider.
For example, if you are planning to give a portion to minors, you may want to consider a staggered distribution, meaning that he or she will not receive his or her inheritance until reaching a particular age. Often, planning which includes staggering the amount over time instead of the entire inheritance all at once, can ensure your gift has a lasting affect by supporting family members at critical times in their lives – graduation, college, first home, etc.
If you do not own property, or have liquid assets over $150,000, then a last will and testament may be sufficient enough. In any event, having a living trust or will, regardless of your financial circumstances, will ensure that your assets are properly distributed.
Another crucial, yet sensitive, element to consider when creating your estate plan is a directive focusing on possible incapacity. Therefore, a properly drafted estate plan contains a Durable Power of Attorney (POA) and an Advance Health Care Directive – both go hand in hand.
The POA lets you appoint someone to manage your day-to-day financial and personal affairs, so consider selecting a trusted friend or family member with strong financial sense. The POA allows your trustee to “step into your financial shoes” and take care of your finances. For example, he or she can pay your bills, deposit checks, and file your tax returns.
An Advance Health Care Directive speaks to your medical wishes, should you become unable to communicate them yourself. This named individual will be authorized, by you, to discuss and make important decisions on your treatment and care. The Advance Health Care Directive allows your agent to make health decisions regarding life support, type of treatments you will receive, and where you will receive these treatments. In the document, you will designate a proxy to make these decisions for you, as well as alternates. When selecting someone for this role, remember it does not have to be the same person as your financial POA, but a trusted individual who knows you well, understands your plan, and who will respect your wishes regarding medical care and life-support decisions.
Both of these documents are typically “springing”, meaning that they only go into effect upon incapacity. And, in accordance with state laws, the preparation and submission of two letters from doctors stating that the individual is incapacitated are necessary. Upon the submission of these letters along with the properly executed documents, your named trustee(s) can take care of your health and financial decisions.
Estate planning may seem a little complicated for singles, but with a bit of research and planning, you can be confident and have the peace of mind in knowing your estate will be distributed to whom you wish, and ensure that there are named proxies designated to take care of your finances and health care, if needed. It’s always wise to contact an estate planning professional as soon as possible in order to make sure all of your bases are covered and your assets are distributed according to your wishes.
I hope this information is helpful in your planning and, as always, if you would like to schedule a phone or in-person consultation to address your estate planning needs, please don’t hesitate to connect with Affinity Trusts here.