Posted by Alicia Waltenberger on Aug 26, 2016 7:08:25 AM
When single friends come to me for advice, it’s more likely to be about their estates than their dates. Here are the key five points that singles ought to consider when creating an estate plan:
- Review beneficiary designations regularly, especially after a big life event. Most estates are a hodgepodge of retirement and bank accounts, as well as tangible assets like property and personal possessions. How they are titled and who is named as beneficiary will determine how those assets are handled and distributed in the event of your death. For example, you may have a 403(b) from the job you left a decade ago, with your ex-husband named as beneficiary. If you never remarried, you may have neglected to update that information, so in the event of your death, your ex would receive your remaining 403(b) funds.
- A will should be the centerpiece of your estate plan. It doesn’t matter how young you are, if you own anything of monetary value, make sure that it is passed on to people or organizations close to your heart by writing a will.
- When creating a will, think carefully about how you want your home and personal property to be divided and distributed. For example: If you’re leaving all your money to charities, what percentage of your overall estate would you like to bequeath to each one?
- Don’t let the state inherit your fortune. If you die without leaving a will, your estate will be distributed according to the laws of your state. If you’re single, that generally means your assets will be passed on to children, siblings or other close relatives. However, there are many single people who don’t have any obvious heirs, and in the absence of a will, their estate will be swallowed up by the state in which they reside. To avoid this, name an executor to guide your estate through probate, the court-supervised process of accounting for your assets. You’ll want someone who is trustworthy, not easily swayed and (ideally) with proven financial expertise. If no close relative fits the bill, you can always hire a third-party individual, such as an attorney.
- Beware federal estate tax, which may be triggered if your estate exceeds the estate tax exemption limit. (In 2016 that figure is $5.45 million, minus any taxable gifts given during your lifetime). If you were widowed after 2010, your estate tax exemption amount may also include the unused tax exemption of your deceased spouse.
I’ve found that women are generally more cautious in their approach to estate planning; they tend to be more emotionally invested in how their assets are distributed after death, and are more likely to set up a carefully crafted trust fund to help protect their heirs from making ill-advised financial decisions, and from creditors potentially looking to recover your unpaid debts.
One issue more likely to affect single women is child custody. Single parents, with sole legal custody of a minor, may stand to gain the most from writing a will, in which they may name a legal guardian to replace them in that role, should something unforeseen happen to them. In the absence of a will, that important decision might be determined by the court system, and your wishes may not be respected. If either of the bereaved child’s parents is still living, for example an ex-partner who doesn’t currently have legal custody, your selection may be challenged in court. The law here is complex, so it’s crucial you consult an attorney before naming a guardian. You may be advised to explain, in your will, why you believe your child’s other parent to be unfit as a custodial parent, and to provide supporting evidence, such as police records.
Another tough decision faced by many single women is who to entrust with decision-making powers, in the event that you become physically or mentally incapacitated. A medical power of attorney authorizes a person to make crucial decisions regarding your medical care and life support. (This doesn’t have to be the same person as your financial power of attorney). Single people often choose friends and significant others to serve in this important role, so it’s critical to keep these designations up-to-date and avoid the risk that someone you’re no longer in touch with gets to make big judgment calls on your behalf.
Creating a solid estate plan is an important way for both married and single people to carve out a legacy and take control of their own destiny. Just remember to review your will and power of attorney designations every few years or following a significant life event. And to guide you every step of the way and help you prepare the necessary documents, it’s essential to find a local estate planning attorney, familiar with your state’s laws.