Many people assume that estate planning is for married people only, especially those who have young children. But single people also need an estate plan. The key difference is that singles who do not have a spouse or children only need to focus on their own protection by laying the groundwork of allowing someone else to make decisions on their behalf if they cannot do so anymore. They may also need to spend more time thinking about where their assets will go upon death, as they do not have obvious primary beneficiaries.
Regardless of why you are considered single – whether you are divorced, widowed or never married – there are things that you should take into consideration when it comes to estate planning.
A will is a legal document that provides instructions for disposing an individual’s estate upon death. By drafting a will, you can make sure that your estate will be distributed according to your wishes.
What if you die without a will?
This state is known as "intestacy." If a person dies intestate, the laws of the state or province where that person lived will dictate how his or her estate will be distributed. Generally speaking, the hierarchy for receiving assets is as follows:
- Children or grandchildren
- Surviving parents
- Siblings, nieces or nephews
- Grandparents, aunts or uncles
- Any children of your deceased spouse
- Any relative of your deceased spouse
- Your state or province of legal residence
Without a will, your estate will be distributed to your next surviving heir but, depending on the situation, that can be someone you may not know or otherwise do not want to leave your estate to. If you want to avoid this situation, you need to create a valid will that names each party as a beneficiary of what you want them to have. You also need to choose someone who will be the executor of your will – this can either be your chosen beneficiary or someone else.
2. Heirs and Beneficiaries
There is a difference between the terms "heir" and "beneficiary." An heir is generally a blood relative while a beneficiary is anyone you name in your will to receive all or part of your estate.
What if you do not have an heir?
If you do not have an heir, make sure to designate beneficiaries for your life insurance, retirement and bank accounts. These designations will supersede any instructions you indicate in your will. To help your beneficiaries avoid probate, which is a costly and lengthy process, consider setting up a revocable trust.
If charitable giving is part of your estate plan, consider using a donor-advised fund. Your estate plan can direct a portion of your assets to this fund upon your death. You can either identify the charities you want to make grants to or appoint a successor to manage your charitable giving upon your death if you are not sure which charities you want to support.
3. Power of Attorney
Power of attorney is the authority you bestow on someone to make decisions on your behalf when you are unable to do so.
When do you need a power of attorney?
It is possible to have more than one attorney for different types of decisions such as:
Without a financial power of attorney, a court will appoint someone to handle important financial decisions for you, which can delay access to bank and investment accounts and make it difficult to access funds needed for paying your bills.
Health care decisions
If you have adult children or siblings (and have an intact relationship with them), then you can give them the authority to make medical decisions on your behalf. If you do not have an immediate family, look for someone in your life who can take on this job, such as a relative, close friend or family doctor.
If you will does not name a health care representative or indicate your wishes in a health care directive, you will have no control over who will represent you when you become incapacitated. The danger here is that someone who might not understand your preferences will be making your medical decisions for you.
4. Guardian and Trustee
You may want to consider whom you want to serve as your guardian in the event you become incapacitated. In addition, if you have children, you may state whom you wish to serve as their guardian. The guardian should, of course, be someone whom your children know and you trust to care for them. You may also want to consider setting up a trust to provide aid for your children’s financial welfare. To do this, you will need to select a trustee, who can be your executor, a beneficiary or someone else you have in mind.
Nobody knows what the future holds, so you should prepare for everything – including death. As a single person, especially if you do not have a spouse or children, creating an estate plan will help you ensure that everything you have worked hard for will be in good hands.