Everyone should have an estate plan — including single people with no children. For married couples, the law generally assumes that one spouse will make financial and medical decisions if the other spouse dies or becomes incapacitated. However, for single people, there are no automatic protections for that purpose. Lacking a carefully designed estate plan, important decisions may be made by the courts. Also, single individuals may end up paying additional taxes, or their assets may be distributed in ways they didn’t intend.
Distribution of assets
Without a will that specifies how and to whom your assets should be distributed upon your death, unintended recipients may inherit them. Some assets may pass to the proper recipients because of beneficiary designations, but many types of assets will be distributed according to the laws of intestate succession.
Generally, these laws provide for assets to go to the deceased person’s spouse or children. However, laws vary by state. In some states, for example, the assets of a person who dies without a will may be equally divided, half to the deceased’s spouse and the other half to the deceased’s children.
For single decedents with no children, the law sets out rules for distributing their assets to their closest relatives, such as parents or siblings. Suppose you have no living relatives. In that case, your assets may go to the state. You can better ensure that your assets are distributed according to your wishes — whether it’s to family, friends or charitable organizations — by preparing a will.
Financial and medical decisions
Not all decisions relate to what happens after you die. You may be incapacitated and unable to decide for yourself. That’s why it’s a good idea to sign a durable power of attorney that appoints someone you trust to manage those decisions. That person may need to monitor your investments, pay your bills, file your tax returns and otherwise make financial choices for you. State laws vary, but typically, a court would have to appoint someone to make these decisions on your behalf in the absence of a power of attorney. This can be a costly and time-consuming process that you’ll likely have no say in.
In addition, you should prepare a living will and medical power of attorney (that is, a health care directive) to ensure that your wishes regarding medical care are carried out if you become incapacitated. It’s especially important in cases involving extreme lifesaving measures, such as resuscitation. These documents can also appoint someone you trust to make medical decisions that aren’t expressly addressed.
Without instructions from you, the laws in some states will allow a spouse, children or other “surrogates” to make these choices. If there’s no suitable surrogate, or in states without such a law, medical decisions are generally left to the judgment of health care professionals or court-appointed guardians.
Tax issues
Fair or not, married couples have some advantages when it comes to taxes. Specifically, the marital deduction generally allows spouses to transfer an unlimited amount of property to each other — either during life or at death — without triggering immediate gift or estate tax liabilities. Further, married individuals generally can take advantage of estate portability.
Single people with significant assets should consider estate planning techniques, including trusts. These tools can be used to avoid, or at least defer, gift and estate taxes.
Get planning
If you’re single and have no children, careful estate planning is still critical. Work with your professional advisors, such as your CPA and attorney, to draft a thorough estate plan that addresses your specific situation. Should significant life events such as marriage or the birth of a child happen down the line, you can always revise it.
Related Posts
With many businesses facing a tight job market, the Internal Revenue Service recently reminded employers to check out the work opportunity tax credit (“WOTC”) Recent legislation extended this credit through the end of 2025. Employers ...
If most of your money is tied up in your business, saving for retirement can be a challenge. So, if you haven’t already set up a tax-advantaged retirement plan, consider doing so this year. If ...
Over a certain amount, payments made in the course of a trade or business must be reported to the payees and to the IRS, using a specific form. The recently enacted One Big Beautiful Bill ...
Most married couples assume they should file joint income tax returns, and, usually, that’s the right choice. But under certain circumstances, filing separate returns may offer benefits. Bear in mind that the differences between married ...
Latest News
On June 9, the IRS released Announcement 2022-13, which modifies Notice 2022-3, by revising the optional standard mileage ...
At the tail end of 2021, the Internal Revenue Service (IRS) released new Schedules K-2 and K-3 effective ...
This information is current as of Sunday, November 21, 2021. On Friday, November 19, 2021, after the Congressional ...
HM&M Updates
Dallas, TX – Aug. 7, 2024 – HM&M, a Springline company (HM&M), a leading CPA firm with four ...
DALLAS, Dec. 11, 2024 – Springline Advisory, a trailblazing financial and business advisory firm, is proud to announce its partnership ...
Last month, Senior Manager, Pearl Balsara was invited to speak at the 2023 FPA DFW Annual Conference in ...