Estate Planning for Single People
While discussions of estate planning often focus on married couples, estate planning for a single person is just as important. Estate planning for single people can pose challenges, though, if there’s uncertainty about who to nominate to step in to make decisions on one’s behalf. But failing to create a coordinated plan can cause real problems.
This article by an investigative journalist in the NYTimes from last March details what happens to the estates of people in New York who die without wills. It also explains some of the benefits of being proactive.
What the article doesn’t touch on, however, is that while a will can make things easier on the people you leave behind, a health care proxy and durable power of attorney are arguably more important documents because they’re activated while you’re still alive. Please see my previous blog post on the importance of these documents.
Everyone should have these core documents in place, but there are additional issues of which to be aware. While a will can state who you want to make decisions about your estate upon death and how to distribute property, it also requires probate court involvement which can be time-consuming and expensive. The probate process in Massachusetts can last fifteen months or longer. For this reason, many people prefer planning with revocable living trusts. A living trust is a private document which is designed to avoid court involvement by nominating a successor trustee to step in to manage assets upon death or incapacity. In a difficult, emotional situation, trusts can provide some measure of relief to those you leave behind. To get a better idea about the benefits of avoiding probate, check out this Boston Globe article from last March.
A living trust can be of further benefit if one’s family lives out of state, thus providing for a smooth transition of managing property. It can also be useful if you’d like to leave assets to nieces and nephews. Because minor children can’t legally manage property, a trust can nominate a successor trustee to manage assets for the benefit of children until they reach a certain age. The trust can also state what the funds should be applied to, as well as other limitations and protections, such as spendthrift language or special needs planning. In addition, you might even consider establishing a charitable trust!
While a durable power of attorney can be helpful to pay bills, file taxes, prosecute claims, along with many other benefits, in my experience, many financial institutions won’t honor a durable power of attorney drafted by a lawyer. These financial institutions often have their own forms. They are much more likely to honor a trust, however. For this reason, a living trust can be a much better way to plan for incapacity by allowing a successor trustee to access funds to continue to make mortgage payments, pay bills, and expend funds for one’s care and support.
Finally, I love drafting pet trusts. We know that not all family members are equipped to care for a pet. Because a pet would pass through a will like any other property, a pet trust is an effective vehicle to ensure one's pet is cared for. You can set aside funds and nominate a successor trustee to take care of the animal. Pet trust language can be included within a living trust.
Of course, trusts can reduce or eliminate estate taxes and provide “asset protection” advantages for those you leave behind, as well.
I’d be happy to review your situation and goals and discuss planning options with you. Email me at firstname.lastname@example.org today.