Individuals who are single and don’t have close family members sometimes think that they don’t have to bother with estate planning. But this is a mistaken impression. Estate planning is critical for anyone who possesses assets, regardless of their marital status or family situation.
The most basic estate planning step you can take is to create a last will and testament. This legal document will provide detailed instructions for how your assets will be distributed after you die.
Dying Intestate and Escheated Assets
If you die without a last will and testament — which is referred to as dying intestate — the state will search for legal heirs to whom your assets can be distributed. If none are found, your assets could be escheated, which means the state will claim possession of them. This probably isn’t the outcome many people want for the distribution of their assets after they die.
If you really don’t have any close family members who you want to inherit your assets, spend some time thinking about other people who you want your assets to go to. For example, this might include close friends or charitable organizations you have supported and believe in.
Many people use charitable remainder trusts (CRTs) to pass on their assets to their favorite charities after they die. With a CRT, you will place assets in the trust and the trust will pay you income while you’re alive. Whatever assets are left over after you die will be distributed to the charity or charities you’ve designated.
You don’t have to use a CRT in order to pass your assets onto charity when you die. You can simply list your favorite charity or charities as your beneficiaries in your last will and testament, just like you would family members or friends, if you prefer.
Naming Your Executor
Another important estate planning task is naming a trustee or executor for your estate. This person will be responsible for handling the financial affairs of your estate and making sure that the provisions of your last will and testament are executed faithfully and according to your wishes.
You can name an individual as your executor, such as a friend or business associate, or designate a corporate trustee, which is usually a bank or trust company. Keep in mind that the duties performed by a trustee can be difficult, complex and time-consuming, especially for someone inexperienced in financial and legal affairs. If there’s not an individual you feel comfortable naming as your executor, you should probably consider designating a corporate trustee.
A corporate trustee will be subject to strict fiduciary regulations that ensure decisions are made in the best interests of your estate, not any particular individual or beneficiary. By designating a corporate trustee, you can be assured that your estate plan will be executed objectively and unemotionally.
Other Important Estate Planning Tasks
In addition to creating a last will and testament and designating a trustee, your estate plan should also include instructions for how life-sustaining medical decisions will be made if you can’t make them yourself. This is usually accomplished via two separate legal documents: a living will and a durable power of attorney.
Also known as an advanced healthcare directive, a living will includes instructions for medical decisions concerning life-sustaining measures if you are incapacitated, either physically or mentally. The durable power of attorney, meanwhile, names someone who will be responsible for handling your financial affairs if you are incapacitated or in a vegetative state.
Get Started Now
If you are single and don’t have close family members, don’t make the mistake of assuming that estate planning isn’t important. Make plans now to meet with your attorney and financial advisor to discuss these and other critical estate planning steps you should take.
Please contact us if you have more questions about estate planning or need assistance in creating a comprehensive estate plan.