If you’re single with no kids, you may not have thought much about your estate. After all, what difference does it make if you don’t have a spouse or children to inherit your belongings? You can’t take it with you when you die, of course, but estate planning encompasses much more than simply who gets your stuff when you’re gone.
If you’re a single parent, the importance of a Will and other estate planning tools should be more apparent. But you might not realize that certain estate planning documents may also function as integral parts of your overall financial planning strategy during your lifetime. Properly planning your estate now will reflect favorably on your legacy, whether you run a small business, plan to set up a charitable foundation in your name, or simply want to spare your closest relatives the burden and cost of probate court.
Tomorrow is not guaranteed, so it’s never too early to start planning your estate. The following information is intended to help you better understand the benefits of estate planning for unmarried individuals and how it can fit in with your overall financial plan.
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What are the most important estate planning documents for unmarried people to consider?
There is no one-size-fits-all solution for estate planning. The types of documents and processes most appropriate for you depend on your net worth, the kinds of assets you have, your long-term goals, and other factors. Our free Estate Planning Worksheet for Single People can help you get started.
Here’s a quick rundown of the most common documents:
- Living Trust. A Living Trust allows you to place specific assets into a trust that is managed by a trustee, which may be you during your lifetime. A Living Trust is not subject to probate, so it allows for quick distribution of resources after you die or become incapacitated.
- Last Will and Testament. Unlike a Living Trust, a Will takes effect only upon your death and must pass through probate before assets are distributed. Wills allow you to name who inherits your property, name a Guardian for dependents, and specify funeral arrangements.
- Durable Power of Attorney. A Durable Power of Attorney names a trusted individual (called an “Agent”) to manage your finances if you become incapable of managing them yourself.
Should I create a Living Trust, a Will, or both?
If you’re a single parent, or single with a business or real estate holdings, you may want to have both documents. You might set up a Living Trust and place any assets you have in the trust, appointing yourself as the trustee. If anything happens to you, the assets in your trust can be managed for the benefit of your children or other named beneficiaries by someone you name, or can be distributed to these individuals without having to go through probate. Probate is a time consuming and relatively expensive legal process that happens through a probate court. The advantage that Living Trusts have over Wills is that Wills typically have to go through the probate process. Living Trusts do not, which means more of the value of your estate will go to your beneficiaries (the people you choose to receive your assets) rather than attorneys and the probate courts.
So Living Trusts are a good thing. They may be a bit more costly to set up, but they can save time and money down the road. However, if you are a single parent or caregiver for an elderly dependent, you must also consider who will care for your dependents if something happens to you. You cannot name a Guardian for any minor children, or other dependents in your care, in a Living Trust, but you can in a Will. This is why, as a single parent or caregiver, you may want to prepare both documents. Otherwise, if you should die without a Will and Living Trust, you will be leaving all of these major decisions up to the probate court judge and the laws of your state.
Finally, when it comes to Living Trusts, you may want to consider a Revocable Living Trust, which is a trust that may be amended to account for major life changes, such as getting married or welcoming a new child through birth or adoption. As with most things in life, the details matter. Whether or not a Living Trust and a Will makes sense for you and your particular circumstances depends on a number of factors, including whether or not you have dependents, the extent of your assets, and the laws of your state. Be sure to ask a lawyer if you have specific questions about the right estate planning tools for your situation.
Do I need a Durable Power of Attorney?
When setting up a Will or a Living Trust, many people also opt to establish a Durable Power of Attorney. This document names a trusted individual to manage your legal and financial affairs if you are unable to perform these tasks. This can be especially important for single people, since the person to handle such responsibilities may not be obvious.
A Durable Power of Attorney entrusts the named individual with significant control over your affairs, such as:
- Management of cash, stocks, bonds, retirement funds, and other financial accounts.
- Fiduciary and legal agreements with third parties.
- Emergency estate planning documents.
- Property management.
- Application for public benefits, such as Medicare.
Ultimately, this decision will depend on the complexity of your legal and financial affairs. Say you are out of commission, for whatever reason, and there are serious consequences if certain legal and financial responsibilities are neglected as a result, then a Durable Power of Attorney probably makes sense.
Estate planning is not just for married couples: Get started today
Just because you’re single, doesn’t mean you (and those close to you) can’t benefit from a sensible estate plan. Reviewing your options for a Living Trust, Last Will and Testament, Durable Power of Attorney, and other estate planning tools will go a long way toward ensuring your financial well-being. If you have questions or concerns, don’t hesitate to ask a lawyer.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.