Friday, May 4, 2012
Being single can create estate planning problems. If a single person were to die without a will, the intestacy result might not represent how that individual would have wanted to divide his or her estate. For example, if a single person dies after his or her parents and without siblings, his or her estate could go to a distant cousin rather than close friends or a long-term partner.
Singles also cannot take the tax exemption that allows married couples to bequest items to their spouse without an estate tax. This also applies to same-sex couples, even if the state that the couple resides in recognizes same-sex marriage. Furthermore, if a single person becomes incapacitated without an advance directive or a durable power of attorney, this could leave a family member that the person does not want making decisions with the power to make decisions for the incapacitated person. Therefore, it is important to for single people to plan for the future.
Attorneys advise that single people do the following to prepare for the future. This also applies to same-sex couples because, as long as the federal government does not recognize same-sex marriage, none of exemptions can apply to the same-sex married couple.
- A single person might want to create a will that will bequest property in the manner that the person wants. A single person could also create a revocable trust to ensure that the people designated as beneficiaries in the trust are taken care of after his or her death. This could be a viable option if a person feel that his or her relatives might challenge the will.
- A single person might also want to update any beneficiary designation forms, such as life-insurance policies or 401(k).
- A single person may also consider creating an advanced directive or "living will." Without these forms, unrelated people, regardless of how close their personal relationship is to the patient, cannot make legal or medical decisions. The document appoints someone as an agent to make decisions for an ill or incapacitated person. Furthermore, single people might want to create a durable power of attorney, which could give an unrelated person the right to manage that person's finances. An alternative would be to establish a revocable trust and designate a professional trustee to manage the single individual's finances.
See Consumer Reports Money Adviser, Estate Planning For Singles, ConsumerReports.org, May 2012.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.