> Every legal adult should ensure that his or her wishes are clearly stated in proper estate planning documents.
> Safety nets available to married individuals with children are not as certain for single individuals.
> Failing to plan can burden loved ones to collect assets, resolve conflicts and administer the estate based on state law through the probate court.
Certain life events, such as marriage or the birth of a child, trigger the thought of estate planning. However, single people without children often neglect to think about estate planning or decide that they do not need a plan. This is a mistake. The truth is that every legal adult should have an estate plan in place and, in fact, it could be argued that single people need a clear, complete estate plan even more than married individuals.
Laws of Intestacy
An individual who passes away without a Will dies “intestate,” while a decedent who leaves a properly executed Will is referred to as having died “testate.” When an individual fails to establish an estate plan, his assets are divided amongst family members as dictated by his state’s laws of intestacy.
If a married individual with living descendants dies intestate, the decedent’s assets are divided in shares among the spouse and descendants and distributed through the probate process.[1] In Illinois, his assets would pass one-half to the surviving spouse and the other one-half to the children in equal shares, with the share of a deceased child passing to his or her descendants, if any are then living. While the percentages may not be in accordance with the decedent’s wishes, the law does keep the assets within the typical group of desired beneficiaries, which is the spouse and descendants.[2] A single individual without children, on the other hand, does not have this luxury.
If an individual passes away without a spouse, children and a proper estate plan, his assets are divided amongst his parents and siblings first and then amongst more remote relatives. This can lead to significant, undesirable personal, financial and tax consequences. For example, the decedent may be in a long-term relationship, have stronger relationships with certain siblings or other individuals, have certain loved ones who are less financially comfortable or may not want to pass assets up to older generations for tax or financial reasons. Without a proper estate plan, the individual’s heirs and percentages are left to be decided by the probate court based on state law.
Joint Assets
Another tool that unmarried individuals typically do not (and should not) utilize is the use of joint accounts, which can sometimes provide a safety net for married couples who fail to implement a proper estate plan in a timely manner. A joint account or asset with a right of survivorship will pass directly to the joint owner as long as he or she survives the decedent. However, if the joint owner does not survive or both owners die simultaneously, the account or asset will be subject to the probate process. Owning assets jointly with anyone other than a spouse can expose those assets to additional risks and unintended inheritance consequences and should not be used as a substitute for proper estate planning.[3]
Naming Agents
Powers of attorney for property and health care allow an individual to name an agent to act on his behalf if he is unable to do so.[4] The default agent for a married individual is typically his spouse, but for an unmarried individual, there is no default agent who takes priority over other relatives. Just as married individuals should have proper estate planning in place to name successor agents if the spouse is unable to act, an unmarried individual must have proper documents in place to specify his primary and successor agents since the law or standard practice will not do so without court intervention.
Planning Considerations
While an unmarried individual without dependents may not feel the same urgency to have an estate plan in place, proper documentation of his or her wishes is extremely important since the assumptions imposed by law are insufficient. Additionally, as is the case for all individuals, simplifying the estate administration process for the loved ones who survive the individual should be a priority. This includes not only the avoidance of probate but also the reduction of potential conflicts. By having a proper Will, Revocable Trust and Powers of Attorney in place and accessible to the individual’s loved ones, the individual can ensure that that his assets will be divided and distributed in accordance with his wishes rather than state law and that the process will be as efficient as possible in terms of the cost, time and energy required of the decedent’s surviving family members.
Footnotes:
[1] Please see Probate—What It Is and How to Avoid It.
[2] It is a common misconception that when an individual is survived by a spouse and children, the spouse will inherit the entire estate under the law. This is not the case, and if this is the desired result, as it typically is, it must be done through a proper estate plan.
[3] Please see Issues to Be Considered Regarding Joint Accounts.
[4] Please see Powers of Attorney: Underrated Estate Planning Documents.