No spouse, no kids, no need for an estate plan, right? Wrong. Estate plans are actually more important for single people than their married counterparts.
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If a married person dies without a will, or intestate, that person’s assets generally pass on to their spouse, which is likely what they would have chosen anyway.
But if a single person dies intestate, the distribution of assets is much less clear. Generally assets will be passed to children, living parents or siblings. But if the deceased does not have close relatives, assets may be distributed to a distant cousin rather than a long-time partner, close friend or charity that the deceased may have preferred. Worse, if a relative is not found, the deceased’s assets may go to the state.
Estate planning for single people is increasingly important because more Americans are single now than ever before. Census data show that more than half of adults are single and that trend is likely to increase as fewer young people get married.
A 2014 Gallup Poll found that among those 18-29, a whopping 64 percent had never married, up from 52 percent a decade earlier. The number of married couples in this age group dropped from 29 percent in 2004 to just 16 percent in 2014.
Single status is also increasing for seniors. Among U.S. citizens age 65 and older, 53 percent of women and 26 percent of men were unmarried in 2013 for a total of 18 million divorced, never-married or widowed seniors.
An estate plan can be as simple as a will listing who would have custody of minor children, if applicable, and naming an executor to distribute your worldly goods.
A more sophisticated will can shepherd assets for minor children, minimize estate taxes, and distribute assets to your beneficiaries according to your specific instructions.
Single people often choose a long-time partner, siblings or their nieces and nephews as beneficiaries. Alternately, they may choose to donate some or all of their assets to a charity such as their alma mater, or a medical cause that affected the donor’s life or another important cause.
However, a revocable living trust may be a better alternative to a will, especially if you plan to distribute assets to non-traditional beneficiaries. A will is subject to probate, and, therefore, is open to the public and can be contested in court by relatives. A revocable living trust is private and much harder to overturn, but can still provide for minor children and distribute assets to beneficiaries.
A complete estate plan should also include an advance directive and a power of attorney in case you are incapacitated.
An advance directive names someone that you trust to make medical decisions on your behalf, including which life-preserving procedures you wish to have performed, if any.
A power of attorney names someone you trust to make financial decisions on your behalf. These trusted individuals may be family members or friends who live close by.
Remember, accounts with their own beneficiary designations, such as individual retirement accounts (IRAs), pass to the beneficiaries named on those documents regardless of what your will or trust says. If you are recently divorced, remember to update your beneficiary designations on IRAs, payable-on-death (POD) bank accounts, life-insurance policies and any other accounts that you do not wish your ex to inherit.
Because your single status could change or your relationships with friends could change, it is important to remember to update these documents about every five years. An estate planning attorney can help walk you through your many options and remind you when it is time to update them.
This article was first published in Business in Savannah.
Michael Smith and Richard Barid are co-founders of Savannah-based Smith Barid LLC, which specializes in estate planning, business planning and special needs planning. They are both accredited VA attorneys with extensive experience arbitrating denied pension claims. They can be reached at 912-352-3999 or email@example.com or firstname.lastname@example.org.