Tips for estate planning, long-term care, and financial planning for singles.
When it comes to estate planning, many people picture middle-aged couples with two children drafting a will in an attorney’s office as part of their retirement plan. However, if you are single – whether you were never married, widowed, or divorced – with no children or adult children, estate planning may be the last thing on your mind. More than likely, you’ve put your energy into growing your dream career, saving money, traveling, spending time with loved ones, and indulging in your favorite hobbies.
While all of these are worthy pursuits, taking the time to put your affairs in order is considered essential, especially if you are single and currently have no named heirs. Without an estate plan, singles are often shocked to find that a probate court will divide their assets according to state laws, leaving out the friends, family, and favorite charitable organizations they may have intended to name as beneficiaries.
Fortunately, your intentions can become plans with only a few critical documents and decisions made with the help of your attorney, accountant, and a trusted financial advisor, like one of our experienced team members at The BlackOak Group in Williamsville, NY.
Don’t Wait to Make an Estate Plan
While estate planning may seem complicated, taking the time to put your plans in order now means that you can feel confident in your estate’s eventual allocation. Plus, you will have peace of mind knowing you have made this challenging time more manageable for your loved ones.
As a single person, you may wish to name a beneficiary in your will. Many choose an adult child, family member, close friend, or even a charitable organization. Otherwise, your state’s probate court will determine the beneficiaries according to state law.
Additionally, selecting a trusted executor – or administrator – of your will is critical. Your executor will manage your estate during the probate procedures, settle final expenses and debts, distribute residue, and file estate tax returns on your behalf.
Once you have drafted your will, you must ensure that you sign and finalize your plan according to state law. Some states require witnesses or notarization for your will to stand up in court, so it’s best to speak with an attorney to ascertain your will’s validity.
Select a Power of Attorney for Financial and Medical Affairs
Choosing a power of attorney for financial affairs and a health care proxy is critical if you become unable to make decisions for yourself. While some prefer the same person for both roles, others select two individuals to manage the respective responsibilities.
Regardless of who you select, you should be sure that they are close companions you can fully trust. You should also alert each person to their nominations and begin conversations as soon as possible, so your friends or family members feel confident in their roles.
Power of Attorney for Financial Decisions
Without valid documents officially appointing a friend or family member with power of attorney for critical financial decisions, managing your estate may become complicated. Your state probate court will nominate someone to handle financial matters on your behalf, which could tie up your bank accounts and investment portfolios while delaying access to the money needed for final expenses and other bills.
However, by nominating a power of attorney, a trusted friend or family member may legally manage financial decisions, access your bank account and investments, and pay bills, estate tax returns, and other final expenses promptly.
Health Care Proxy
A health care proxy, or medical power of attorney, is similar to a financial power of attorney in that he or she will have legal authorization to make critical decisions on your behalf. When you designate a health care proxy, you should also include your wishes for medical intervention in the event that you cannot express your desires at the time.
Health care proxy documents must be intact to assist medical providers in carrying out your wishes. Single people with adult children or trusting relationships with other family members may select one of them as a health care proxy or opt for a close friend instead. However, if you would prefer a third party, you can always select estate planning attorneys or healthcare advocates as your health care proxy.
Plan for Long-Term Health Care Needs
In 2019, a study conducted by Genworth(1) estimated that more than 70% of Americans would require long-term health care. With home health costs rapidly increasing, a rising number of Americans in middle-income brackets experience an affordability gap.
Including long-term health care provisions in your estate planning helps ensure that you can afford proper attention and treatment when necessary. You may choose to take out long-term care insurance directly or through a trust, or add long-term care to your life insurance policy. Adding long-term care as a rider on your life insurance policy offers increased flexibility, though it does incur an additional charge.
Name Your Heirs – and Keep Your Beneficiaries Up to Date
For many married individuals, spouses or children are natural beneficiaries. However, a will is necessary for single individuals to make sure their money and property go where they desire.
Clearly name your heirs in your will to make sure that your friends, family, and favorite charities receive their intended money or belongings. You can also designate specific beneficiaries on your life insurance, pension, investment, and bank accounts – and keep them current as relationships change.
Beneficiaries on specific accounts will override any named heirs in your will, so it’s up to you to keep your accounts current to ensure that ex-partners or other unwanted inheritors don’t receive money unintentionally. By naming beneficiaries, you can make sure that the accounts are automatically made payable upon your death, allowing assets to skip any probate procedures.
Finally, you may choose to place assets in a revocable trust. You will control the trust throughout your life, and assets in the trust will pass to one or more designated beneficiaries upon your death. It is imperative to name a trustee in this case, however. This person will manage the trust when you are unable to do so yourself.
Before finalizing your estate plan, check with your attorney to ensure that your will complies with state laws, which may vary from state to state.
Consider Legacies for Family, Friends, and Charitable Organizations
Finally, take a moment to consider the legacies you would like to leave. Many choose to donate to charitable organizations or foundations, whether directly or by creating a charitable trust. If you feel financially secure and confident in your retirement plan, you may even choose to consider making a significant reduction in your estate and contributing to a charity now while you can enjoy it.
You may also choose to leave a legacy to your friends or family through annual gifts of up to $15,000 or unlimited amounts for medical expenses and education payments for your loved ones. However, the IRS does specify constraints in some instances.
Make Key Estate Planning Decisions Today for Improved Retirement Preparation Tomorrow
No matter if you’re widowed, divorced, or unmarried, estate planning for singles comes with its own needs and unique requirements. Even unmarried couples living together – considered single by legal standards – must take well-coordinated steps to plan their estates.
While estate planning can be a complicated and emotional process, it’s a critical element of retirement preparation. If you are single and living without a current estate plan that includes asset allotment and transfer, we welcome you to book a consultation to speak with one of our trusted financial advisors at The BlackOak Group in Williamsville, NY. We are ready and willing to help by working with you and your attorney to create a comprehensive estate plan that suits your needs and carries out your last wishes.
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(1) Part of being generous this time of year may include showing your employees some appreciation. And holiday bonuses are certainly a great way to show employees you care – but they don’t necessarily have to be monetary.
GE- 3183122 (07/2020) (Exp. 07/2022)
This article was originally approved for use in March 2021 and certain information presented may have changed. For more current information please contact a member of The Black Oak Group.
Equitable Advisors, its affiliates, and associates do not provide legal or tax advice or services. Individuals should consult their personal legal and/or tax advisors regarding their particular situation.
Written by Austin Kelly, CPF®, AIF®, CPFA
Co-Founder & Managing Partner
The BlackOak Group
PPG-159169
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