There are more singles today than ever before. In America today, the divorce rate is 50 percent for first marriages and even higher for second and third marriages. In 1970, about one-third of Americans 15 and older were single. Today, the number is closer to 50 percent. This means that single people need to be thinking about estate planning as much as married couples. The absence of a spouse and sometimes no decedents result in single people with unique circumstances who need advanced planning, time, and the help of a professional to plan their estate.
Estate Planning Issues Facing Singles Today
Single people face particular issues in their estate distribution when they die. If you die without a will or trust, your property gets distributed according to the default rules of your state. When a husband or wife dies intestate (without a will), their assets generally pass to their spouse and/or children. A single person’s assets, however, will usually pass to the closest blood relative. Children are first in line, if any, followed by parents, siblings, and then more distant relatives. Close friends, unmarried partners, and charities one may want to benefit would be out of the picture.
Single with Minor Children
Single individuals with minor children also face more difficult decisions when naming potential guardians and/or trustees for their children. Married couples have the same difficult decisions to make but they have more of a contingent nature. The majority of married couples will plan for their assets pass first to the surviving spouse, then to their children. Thus, both spouses would need to pass away before their children reached the age of majority for their guardianship appointment to take effect.
In terms of general probability, there is a greater chance a single person will die before both spouses of a married couple pass away. This is why a second to die life insurance policy is cheaper than an individual life policy. Single people with minor children need to carefully consider guardian and trustee provisions in their estate planning, since there is a higher likelihood they will be needed compared to married counterparts.
Single and Divorced
Other issues arise in the single person’s estate distribution. Certain accounts require account holders to designate a beneficiary. The beneficiary designation is typically upheld when the account holder dies, even if she gave the account to someone else in a will. If a single person was married and is now divorced and her wishes have changed, she will want to ensure that her ex-spouse is not still named as a beneficiary on any of her bank accounts, retirement accounts, or life insurance policies, which all pass outside of her last will and testament.
Powers of Attorney for Singles
Other estate planning issues involve financial and medical decisions. If a single person is incapacitated because of an injury or illness, it is critical that she designate a trusted family member or friend to manage her assets and healthcare in the event she is unable to do so herself. If single, you will need an advance healthcare directive, a general power of attorney, and a federal Health Insurance Portability and Accountability Act (HIPAA) authorization, which allows you to choose someone you trust to make financial and medical decisions on your behalf. Without proper directives, those decisions could fall to distant relatives or state-appointed strangers after a guardianship proceeding in court.
Estate Planning Essentials
For married couples the common answer to the question: “Who do you want to serve as Executor, Trustee, Guardian, or Agent for Powers of Attorney?” is almost always their spouse. Single individuals will need to carefully consider the duties of each of these positions and name the appropriate person for each one. As a single person, speaking with a professional can help simplify the process of estate planning. Consult with an estate planning lawyer about essential estate plan documents, including:
- Last Will and Testament. The centerpiece of your estate plan. Name guardians for minor children, if any, and assign an executor to guide your estate through probate. For your executor, options include a close relative or friend, or potentially an objective third-party, such as an attorney.
- Durable Power of Attorney. Appoint someone to manage your day-to-day financial and personal affairs even if you become unable to do so for yourself.
- Healthcare Power of Attorney. Appoint someone to speak to your medical wishes if you are unable to communicate them yourself.
- Updated Beneficiary Designations. Determine who will receive your benefits including life insurance and retirement plan assets and make sure they are up-to-date.