28 Oct 2014

I’m single. Why do I need an estate plan?

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This is a little bit of a trick question because your circumstances as a single person are important to know. How old are you? Do you have children? Do you have no assets or substantial assets? What is the status of your health? The answers to these questions are the ones that a married couple or partners also need to answer in order to develop their estate plan.

The short answer is that everyone needs an estate plan, although for a variety of reasons. Certainly single parents with young children need an estate plan in order to appoint someone to care for their minor children or to set up a trust for their benefit. What if something happens to you that leaves you incapacitated? Perhaps more than a couple, a single person needs an estate plan to appoint a family member or trusted friend to act on their behalf in the event of incapacity.

However, there are a couple of advantages singles enjoy that couples and families don’t.

• The first big advantage is that the single person only has to please him or herself. Married couples often have different ideas on how assets should be divided and are required to make plenty of compromises along the way.
• A single person is less likely to have heirs that must be factored into the mix, and often the estate planning can focus on things like gifting. Gifting can be done by provided a yearly gift, setting up a trust that pays a yearly stipend, tuition or medical gifting and much more. Of course, this requires more complex planning than simply passing an estate along on to a spouse.

Of course, there are also some disadvantages for singles as they prepare their estate plans.

• If you’re single and die without a will or a trust, your assets will go to your relatives even if you wanted them to go to a partner, friend, or charity. Your property will pass to your children, if you have any, and then to your parents. If you don’t have any children and your parents die before you do, your estate will go to your siblings or down the line to more distant kin. In a worst-case scenario, a long-time partner will get nothing while a cousin will inherit everything.
• Failure to plan can also cause problems while you’re still alive. Typically the surviving spouse is named as the power of attorney for a married couple, however, as a single person, you have to think more carefully when naming someone to take over the health and financial decisions for you. If you don’t appoint someone – who is going to do it? If you become incapacitated, a judge might give one of your relatives the right to make medical and financial decisions for you. If you have no living relatives, the court may appoint a stranger as your guardian or conservator.
• A single person is on their own when saving for retirement. Specifically, a single person has to accumulate more income that a traditional couple because they battle higher income taxes throughout their lifetime. In addition, a single person can only contribute once to their 401K, unlike singles where both partners can put in the maximum amount.
• Just because a person is single doesn’t mean they don’t have dependents of other family members they need or want to plan for (like nieces and nephews, friends or other family members).

Both the advantages and disadvantages mean that single people need to plan very carefully how to pass along their estate. That’s why an experienced attorney can make sure your wishes are legally spelled out and carried out.