Estate planning discussions often center on married couples, but single clients also need to focus on this important matter. In some cases, singles might lack an obvious primary beneficiary or heir so their preparation might need to be focused differently, but the cost of not having a solid estate plan in place is real and can cause major problems for people who are single.
The Pew Research Center reports that 20% of adults age 25 and older had never married as of 2012, a substantial increase from the 11% reported in 1960. It is a common belief for many people, both those at the beginning of their work life as well as those in the middle of their working years, to think estate planning is an issue that can wait until they have children or are married. However, the need to designate beneficiaries regarding assets, or whom should be made an advocate regarding medical care should not wait. It is often difficult to determine who clients desire to make these decisions without written instructions.
When a will does not exist, the majority of state laws follow rigid genealogical rules for distribution of assets. Even though these laws are well-known and can be implemented without great difficulty in the legal world, in many cases the process will still chew up time and precious resources. Usually, the laws stipulate that if there are no living relatives, assets may pass to the state. There are four essential estate planning steps single people can take to avoid these issues:
1) Write a Will
A client’s will is the centerpiece of any estate plan. It allows a client to distribute their assets as they see fit while also allowing clients to designate guardians for dependents and choose an executor to guide the estate through the probate process.
2) Create a Durable Power of Attorney
Allows single clients to designate someone to manage any day-to-day financial or personal affairs if the client is incapacitated unexpectedly and cannot make decisions for themselves.
3) Health Care Directive
This document allows single clients to voice their wishes when it comes to possible future medical care. This gives unmarried individuals an opportunity to designate someone who is legally allowed to discuss and make decisions regarding medical treatment and care they are not able to for themselves. It is important that clients choose someone who knows them well and will respect their wishes on medical care and other medically-important decisions, such as life support or hospice care.
4) Revocable Living Trusts
This type of trust allows a chosen individual to carry out client’s financial wishes and goals if they were to pass or become otherwise incapacitated. When establishing a revocable living trust, it is also a good time to take a look at beneficiaries listed on any life insurance policies or retirement accounts. Otherwise, the state can take control of these funds once a client passes.
Whether an individual is married or single, estate planning is an important part of long-term financial planning. Speaking with unmarried clients presents a few more variables to consider, but a prudent financial advisors working with clients to write a will, a durable power of attorney, a health care directive and a revocable living trust can deal with the vast majority of potential situations a single person might encounter in the future.