Singles, especially those without children, might think that they don’t need to have an estate plan. However, it is important to remember that estate planning is for when you are incapacitated, as well as asset distribution.
While some tasks for estate and retirement planning for singles are the same as for couples, a recent article in Forbes, “5 Financial Planning Strategies For Singles,” notes that singles need to prepare for medical and financial emergencies. While a spouse is not a guarantee that these issues will be handled to a person’s liking, a single adult needs to be more self-reliant and that means planning in advance.
Start saving for retirement now. Many of us will bank on Social Security along with our own personal savings in retirement. Some may have a pension or will possibly continue working in retirement. Whatever the exact plan, a good retirement savings objective is 15% of your salary and include your employer match, if you get one in your 401(k) plan. If you don’t have a plan through work, consider starting a personal IRA.
Prepare for the unexpected. Singles don’t have the luxury of a second income as a fall back, so build up an emergency fund that can cover three to six months of expenses. Singles should aim toward the six-month cushion, so any unexpected expenses can be paid off without having to use your credit cards or retirement savings. Keep the money in a liquid account.
Consider insurance. Life insurance can be a replacement income for those who depend on you. With no dependents, it might not be needed, but consider a small policy to cover funeral expenses.
Estate planning. Perhaps you think you don’t need an estate plan because you’re single. However, you should have certain documents prepared. Consider planning with a trust to minimize the costs and stress associated with the probate process, pass the majority of your assets to your heirs instead of the state. There are other important documents to have in place should you become incapacitated, so that a trusted friend or family member can make health and financial decisions on your behalf: a Health Care Proxy and Durable Power of Attorney. An experienced estate planning attorney will be able to discuss your concerns and options and help you create an estate plan to best suit your situation. For single parents of minor children, a will should be used to designate a guardian for them.
Make sure that your beneficiary designations are up to date, since most of your assets are likely in your own name. The beneficiary designations will be in force, regardless of any wishes expressed in a trust or will. You should also review your life insurance policies and retirement accounts. A living trust can help avoid probate, but a trust only controls assets that are in the trust. You must put assets into the trust (commonly known as “funding” the trust but in our office, referred to as “aligning your assets with your estate plan”). A person can have a well-drafted trust, but if assets are not properly aligned with the trust, they will most likely lose out on the benefits of creating trust. In addition, our lives are always changing, from new jobs to new children or grandchildren, a move or the purchase of a vacation home or other property. From time to time, tax laws change, as well. To ensure your estate plan will work when it needs to—at the time of your death or incapacity—you’ll need to not just align assets with your estate plan initially, but continue to track and monitor that any new or changing assets remain in alignment with your overall estate plan.
Talk with an experienced estate planning attorney, who will not only be able to help you set up an estate plan, but who has an ongoing updating or client care program to keep your plan up to date and track alignment of your assets over time to protect you and any heirs. Don’t forget to speak with family members or trusted friends, so that they know your wishes.
At Family Estate Planning Law Group, we believe that an up-to-date estate plan is critical no matter your age or marital status. For more information, explore our website and contact us to schedule your consultation today!
Reference: Forbes (July 5, 2017) “5 Financial Planning Strategies For Singles”