How Should a Single Person Create an Estate Plan?

The short answer is singles should be doing the same things as people who are married and have families, except their situation may require some additional steps, says an article from Kiplinger, “Estate Planning for Singles.”

The most important thing is having a Durable Power of Attorney, naming someone as your agent so they can make financial decisions if you become incapacitated. Similarly, you should also appoint a Health Care Proxy to handle medical decisions.

If you don’t have a will, your state’s law will determine how your assets will be distributed, but no state will have a list of people to make financial or health care decisions for you.

Adult children often fill these roles, but it’s fine to look for other people to serve in these roles. A trusted friend whose judgment you trust completely and who is good at managing financial and legal matters could also serve in this role.

If the person you name to be your representative dies or becomes incapacitated, you’ll want to have a plan for someone else to take on the role.

Consider the age of the person you may want to serve in their role. If they are your age, can they take on these tasks if and when needed? A younger, trusted person may be a better choice, although there are no guarantees of age determining their availability.

If you don’t know anyone who could manage these roles, you could hire a professional, either an estate planning attorney, a trust company, or, in some states, someone licensed as a “professional fiduciary.”

What about your pets? An estate plan can also deal with issues of special concern to singles who own pets. You can use your will or create a pet trust to name a guardian and provide financial support for a furry or feathered friend.

Lastly, certain states have estate taxes, which have far lower exemptions than the current federal estate tax of more than $13 million. Some state estate taxes kick in on estates valued at $1 million. Married couples can delay estate taxes until the second spouse’s death, but singles need to plan for tax liabilities, which is part of an estate plan.

Reference: Kiplinger (Feb. 17, 2024) “Estate Planning for Singles”

Is an Estate Plan Battle Looming?

Some people don’t create an estate plan before they die. Or, if they do, they failed to have an estate plan created with an experienced estate planning attorney and their will is unclear, or even invalid. They might die with debts conflicting with their wishes. These and other situations can lead to a long and expensive probate period, as described in the article “In-fighting Families, Wills, Laws & Other Things That Could Hold Up Probate” from yahoo!.

How long does it take for an estate to move through the probate process? It depends upon the complexity of the estate and how well—or poorly—the estate plan was created.

What is probate? Probate is the process where the court oversees the settlement of an estate after the owner dies. If there is a will, the court authenticates the will and accepts or denies the executor named in the will to carry out its instructions. The executor is usually the decedent’s spouse or closest living relative.

How does probate work? Probate is governed by state law, so different states have slightly different processes. The first thing is authenticating the will and appointing an executor. The court then locates and accesses all of the property owned by the decedent. If there are any debts, the estate must first pay off the debts. When the debts have been paid, the court can distribute the remaining assets in the estate to heirs.

If there is no will, the person is said to have died intestate. The court may then appoint an administrator to carry out the necessary tasks of paying debts and distributing assets. The administrator is paid from the estate.

How long does it take? It depends. If the decedent had placed most of their assets in trust, those assets are not subject to probate and are distributed according to the terms of the trust. If there are multiple properties in multiple states, probate has to be conducted in all states where property is owned. In other words, probate could be six months or three years.

Estate size matters. Certain states use the total value of the estate to determine its size, rather than examine individual properties. Possessions subject to probate usually include personal property, cash and cash accounts, transferable accounts with no named beneficiaries, assets with shared ownership or tenancy in common and real estate.

Possessions not typically subject to probate include insurance proceeds, accounts owned as Joint Tenant with Rights of Survivorship, accounts with a beneficiary designation and assets owned in trusts.

Probate varies from state to state. Probate is not nationally regulated, and state-level laws vary. An estate could be swiftly completed in one state and take a few months in another. Some states have adopted the Uniform Probate Code (UPC), designed to streamline the probate process by creating standardized laws. However, only 18 states have adopted this code to date.

Fighting among heirs makes probate take longer. Even small disputes can extend the probate process. If there are estranged family members, or someone feels they deserve a larger share of the estate, conflicts can lead to probate coming to a full stop.

An experienced estate planning attorney can help structure an estate plan to minimize the amount of assets passing through probate, while ensuring that your wishes are followed and loved ones are protected.

Reference: yahoo! (Nov. 21, 2022) “In-fighting Families, Wills, Laws & Other Things That Could Hold Up Probate”

Does Marriage have an Impact on a Will?

It is very difficult to challenge a marriage once it has occurred, since the capacity needed to marry is relatively low. Even a person who is under conservatorship because they are severely incapacitated may marry, unless there is a court order stating otherwise, says the article “Estate Planning: On Being Married, estate planning and administration” from Lake Country News. This unfortunate fact allows scammers to woo and wed their victims.

What about individuals who think they are married when they are not? A “putative” spouse is someone who genuinely believed they were married, although the marriage is invalid, void, or voidable because of a legal defect. An example of a legal defect is bigamy, if the person is already married when they marry another person.

Once a couple is married, they owe each other a duty to treat each other fairly. In certain states, they are prohibited from taking unfair advantage of each other. Depending on the state of residence, property is also owned in different ways. In a community property state, such as California, marital earnings and anything acquired while married is presumed to be community property.

In a community property state, debts incurred before or during the marriage are also shared. In a number of states, marriage is sufficient reason for a creditor to come after the assets of a spouse, if they married someone with pre-marital debts.

There are exceptions. If a married person puts their earnings during marriage into a separate bank account their spouse is not able to access, then those deposited earnings are not available for debtor spouse’s debts incurred before the marriage took place.

If a married person dies without a will, also known as “intestate,” the surviving spouse is the next of kin. In most cases, they will inherit the assets of the decedent. If the decedent had children from a prior marriage, they may end up with nothing.

These are all reasons why couples should have frank discussions about finances, including assets and debts, before marrying. Coming into the marriage with debt may not be a problem for some people, but they should be advised beforehand.

A pre-nuptial agreement can state the terms of the couple’s financial health as individuals and declare their intentions. An experienced estate planning attorney can create a pre-nuptial to align with the couple’s estate plan, so the estate plan and the pre-nuptial work together.

Marriage brings rights and responsibilities which impact life and death for a couple. Starting a marriage based on full disclosure and proper planning clears the way for a focus on togetherness, and not solely the business side of marriage.

Reference: Lake Country News (Feb. 12, 2022) “Estate Planning: On Being Married, estate planning and administration”

Can You Refuse an Inheritance?

No one can be forced to accept an inheritance they don’t want. However, what happens to the inheritance after they reject, or “disclaim” the inheritance depends on a number of things, says the recent article “Estate Planning: Disclaimers” from NWI Times.

A disclaimer is a legal document used to disclaim the property. To be valid, the disclaimer must be irrevocable, in writing and executed within nine months of the death of the decedent. You can’t have accepted any of the assets or received any of the benefits of the assets and then change your mind later on.

Once you accept an inheritance, it’s yours. If you know you intend to disclaim the inheritance, have an estate planning attorney create the disclaimer to protect yourself.

If the disclaimer is valid and properly prepared, you simply won’t receive the inheritance. It may or may not go to the decedent’s children.

After a valid qualified disclaimer has been executed and submitted, you as the “disclaimor” are treated as if you died before the decedent. Whoever receives the inheritance instead depends upon what the last will or trust provides, or the intestate laws of the state where the decedent lived.

In most cases, the last will or trust has instructions in the case of an heir disclaiming. It may have been written to give the disclaimed property to the children of the disclaimor, or go to someone else or be given to a charity. It all depends on how the will or trust was prepared.

Once you disclaim an inheritance, it’s permanent and you can’t ask for it to be given to you. If you fail to execute the disclaimer after the nine-month period, the disclaimer is considered invalid. The disclaimed property might then be treated as a gift, not an inheritance, which could have an impact on your tax liability.

If you execute a non-qualified disclaimer relating to a $100,000 inheritance and it ends up going to your offspring, you may have inadvertently given them a gift according to the IRS. You’ll then need to know who needs to report the gift and what, if any, taxes are due on the gift.

Persons with Special Needs who receive means-tested government benefits should never accept an inheritance, since they can lose eligibility for benefits.

A Special Needs Trust might be able to receive an inheritance, but there are limitations regarding how much can be accepted. An estate planning attorney will need to be consulted to ensure that the person with Special Needs will not have their benefits jeopardized by an inheritance.

The high level of federal exemption for estates has led to fewer disclaimers than in the past, but in a few short years—January 1, 2026—the exemption will drop down to a much lower level, and it’s likely inheritance disclaimers will return.

Reference: NWI Times (Nov. 14, 2021) “Estate Planning: Disclaimers”

What Is the Purpose of an Estate Plan?

No one wants to think about becoming seriously ill or dying, but scrambling to get an estate plan and healthcare documents done while in the hospital or nursing home is a bad alternative, says a recent article titled “The Essentials You Need for an Estate Plan” from Kiplinger. Not having an estate plan in place can create enormous costs for the estate, including taxes, and delay the transfer of assets to heirs.

If you would like to avoid the cost, stress and possibility of your spouse or children having to go to court to get all of this done while you are incapacitated, it is time to have an estate plan created. Here are the basics:

A Will, a Living Will, Power of Attorney and a Beneficiary Check-Up. People think of a will when they think of an estate plan, but that’s only part of the plan. The will gives instructions for what you want to happen to assets, who will be in charge of your estate—the executor—and who will be in charge of any minor children—the guardian. No will? This is known as dying intestate, and probate courts will make all of these decisions for you, based on state law.

However, a will is not enough. Beneficiary designations determine who receives assets from certain types of property. This includes life insurance policies, qualified retirement accounts, annuities, and any account that provides the opportunity to name a beneficiary. These instructions supersede the will, so make sure that they are up to date. If you fail to name a beneficiary, then the asset is considered part of your estate. If you fail to update your beneficiaries, then the person you may have wanted to receive the assets forty years ago will receive it.

Some banks and brokerage accounts may have an option of a Transfer on Death (TOD) agreement. This allows you to plan out asset distribution outside of the will, speeding the distribution of assets.

A Living Will or Advance Directive is used to communicate in advance what you would want to happen if you are alive but unable to make decisions for yourself. It names an agent to make serious medical decisions on your behalf, like being kept on life support or having surgery. Not having the right to make medical decisions for a loved one requires petitioning the court.

Financial Power of Attorney names an attorney in fact to manage finances, paying bills and overseeing investments. Without a POA, your family can’t take action on your financial matters, like paying bills, overseeing the maintenance of your home, etc. If the court appoints a non-family member to manage this task, the family may see the estate evaporate.

Creating a trust is part of most people’s estate plan. A trust is a means of leaving assets for a minor child, or someone who cannot be trusted to manage money. The trust is a legal entity that inherits money when you pass, and a trustee, who you name in the trust documents, manages everything, according to the terms of the trust.

Today’s estate plan needs to include digital assets. You need to give someone legal authority to manage social media accounts, websites, email and any other digital property you own.

The time to create an estate plan, or review and update an existing estate plan, is now. COVID has awakened many people to the inevitability of severe illness and death. Planning for the future today protects the ones you love tomorrow.

Reference: Kiplinger (April 21, 2021) “The Essentials You Need for an Estate Plan”

How Do You Handle Probate?

While you are living, you have the right to give anyone any property of your choosing. If you give your power to gift your property to another person, typically through a Power of Attorney, then that person is your agent and may give away your property, according to an article “Explaining the basic aspects probate” from The News-Enterprise. When you die, the Power of Attorney you gave to an agent ends, and they are no longer in control of your estate. Your “estate” is not a big fancy house, but a legal term used to define the total of everything you own.

Property that you owned while living, unless it was owned jointly with another person, or had a beneficiary designation giving the property to another person upon your death, is distributed through a court order. However, the court order requires a series of steps.

First, you need to have had created a will while you were living. Unlike most legal documents (including the Power of Attorney mentioned above), a will is valid when it is properly signed. However, it can’t be used until a probate case is opened at the local District Court. If the Court deems the will to be valid, the probate proceeding is called “testate” and the executor named in the will may go forward with settling the estate (paying legitimate debts, taxes and expenses), before distributing assets upon court permission.

If you did not have a will, or if the will was not prepared correctly and is deemed invalid by the court, the probate is called “intestate” and the court appoints an administrator to follow the state’s laws concerning how property is to be distributed. You may not agree with how the state law directs property distribution. Your spouse or your family may not like it either, but the law itself decides who gets what.

After opening a probate case, the court will appoint a fiduciary (executor or administrator) and may have a legal notice published in the local newspaper, so any creditors can file a claim against the estate.

The executor or administrator will create a list of all of the property and the claims submitted by any creditors. It is their job to ensure that claims are valid and have been submitted within the correct timeframe. They will also be in charge of cleaning out your home, securing your home and other possessions, then selling the house and distributing your personal furnishings.

Depending on the size of the estate, the executor or administrator’s job may be time consuming and complex. If you left good documentation and lists of assets, a clean file system or, best of all, an estate binder with all your documents and information in one place, it can alleviate a lot of stress for your executor. Estate fiduciaries who are left with little information or a disorganized mess must undertake an expensive and burdensome scavenger hunt.

The executor or administrator is entitled to a fiduciary fee for their work, which is usually a percentage of the estate.

Probate ends when all of the property has been gathered, creditors have been paid and beneficiaries have received their distributions.

With a properly prepared estate plan, your property will be distributed according to your wishes, versus hoping the state’s laws will serve your family. You can also use the estate planning process to create the necessary documents to protect you during life, including a Power of Attorney, Advance Medical Directive and Healthcare proxy.

Reference: The News-Enterprise (Feb. 2, 2021) “Explaining the basic aspects probate”

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