If you are single (or single again), then you are in good company. According to bean counters at the U.S. Census, more than one-third of Americans age 15 and older are single back in 1970. Drum roll, please. As of last year, some 50% of Americans are single.
That is quite a jump, yes?
Among the traditionally retired demographic, among Americans age 65 and older 53% of women and 26% of men were unmarried as of last year. Translation: Your fellow citizens include some 18 million who divorced, never married or single again (as widows or widowers).
Surprise, surprise, accordingly to a recent Wall Street Journal article, titled “Estate-Planning Essentials for Single People,” single people face some unique estate-planning issues.
This is true whether they have always been single or now single again.
The original article reviewed several areas of exposure when it comes to estate planning for singles, to include:
Heirs. If you die without a will or trust, then your property may be divided up by the probate court according to the laws of your state. While that might work for some married couples who have children, it rarely works for single people.
Typically, if you're married and you die without a will or trust, your spouse inherits most if not all of your assets. On the other hand, if you're single and die intestate, your estate could get distributed in unintended ways. How so?
Generally it passes first to your children (if any), then to your parents (if either or both are living), any siblings, then more-distant relatives. Last, if no living relative can be found (commonly within six degrees of consanguinity), the state will take it!
No joke, no fun.
So you can see how important it is to at least create a will and/or a revocable living trust that states specifically how you want your assets to be distributed after you die, as well as to name an executor and/or trustee to carry this out.
Decision Makers. If you fail to designate an individual to take care of your financial and medical affairs in the event of your incapacity, your assets and care could fall into the hands of a distant relative or a stranger appointed by a judge.
So, what should you have?
Be sure to sign a general power of attorney, an advance health-care directive, and an authorization for federal HIPAA laws to empower trusted individuals to make financial and medical decisions on your behalf in the event you become incapacitated. For those without spouses or children to fill these roles, it is essential to take care of this.
Estate Taxes. Any tax liability for your estate depends on "how" you are single. If you never married or you are divorced, any of your estate in excess of the federal individual exclusion is subject to tax. If you are a recent widow or widower, your federal exclusion amount ($5.34 million for 2014 and $5.43 million for 2015) includes—not only the individual estate-tax threshold—but also may include any unused portion of your deceased spouse’s exemption amount, which is termed “portability.”
This is true even if you remarry. In either instance, however, this "portability" is not automatic and requires the filing of a Form 706 Estate Tax Return with the IRS.
While the federal estate-tax exemption has risen in recent years, 19 states plus D.C. impose estate taxes of their own and/or inheritance taxes on the heirs who receive these assets.
Just a few states follow the federal portability rules, so you might need to create a special trust to make use of two exemptions.
If you are single or know someone who is, then these estate planning moves should be made without delay. This is not a do-it-yourself project either.
An experienced estate planning attorney can assist you with this.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.
Reference: Wall Street Journal (December 7, 2014) “Estate-Planning Essentials for Single People”