In 1950, only 33% of Americans over the age 15 were unmarried. By 2015, that number increased to almost 50%.1 Despite this shift, the vast majority of estate planning advice focuses on married couples and families. Estate planning is just as important for unmarried persons as it is for families – and singles have unique estate planning needs.
Who Inherits Your Assets?
If a married person dies without a will, or intestate, the estate assets typically pass by default to his or her spouse. For a single person who dies intestate, the assets generally pass to next of kin, beginning with any children, living parents and siblings, and then on to other, more distant relatives. If there are no living relatives, estate assets may transfer to the state. Creating a Last Will and Testament gives you the opportunity to designate heirs for your assets. These heirs can be friends, relatives, charitable organizations or others.
What about IRAs and Other Retirement Accounts?
Singles, particularly divorced singles, should review their beneficiary designations on life insurances, IRAs and other retirement accounts. Since these accounts pass outside of your will, the beneficiary designations dictate who receives these assets. Without updating these designations, your ex-spouse may receive these funds.
How Do You Minimize Estate Tax Implications?
Married couples typically have more opportunities to pass assets to their spouses without surpassing the $5.49 million individual estate tax exemption. They can hold property jointly, thereby keeping that property outside of the estate, or take advantage of the portability clause, allowing the surviving spouse to use estate tax exemption for both him- or herself and the deceased spouse. Single persons do not have these same opportunities, so proper estate planning is key to minimizing estate tax liability. Consult with your tax advisor to discuss the best options for you.
Who Has the Authority to Make Decisions for You?
In the event you become incapacitated, a power of attorney allows a person, or attorney-in-fact, you appointed to manage your health care and/or financial decisions. You must create and sign a power of attorney prior to becoming incapacitated. In the event you do not have a power of attorney in place, these health care and/or financial decisions may fall to a distant relative or agent appointed by the state.
Being proactive about estate planning by meeting with an estate planning professional and a financial advisor helps ensure your assets are distributed in the way you choose. To start the estate planning process, contact a Fifth Third Bank financial advisor.