The differences in estate planning for singles versus families can best be understood through the lenses of their very different foci. For singles, their focus is generally and primarily in planning for their own care and wellbeing, with a secondary interest in leaving an inheritance for, or protection of, more distant relations. For families, the focus most often is protecting a spouse or partner and a next generation.
In my over 30 years of legal experience specializing exclusively in estate planning, administration and litigation, the three most important differences/needs for single estate planning clients are summarized by the following (discussed in detail below):
- Financial Planning directed at lifetime resources for the individual’s longterm care and wellbeing (think disability and longterm care insurance as opposed to life insurance; think income generating investments as opposed to growth investments; think lifetime annuities as opposed to payable-on-death benefit arrangements)
- Clear, powerful legal documents that authorize trusted designees to step in while the client is alive but vulnerable if not totally disabled (think Living Trust, broad General Durable Powers of Attorney and Medical Proxies/Living Wills, rather than simply a Last Will)
- A detailed, often updated trail of “breadcrumbs” so that if a trusted designee needs to step in, they can know how and where to do so…rather than relying on a spouse or partner.
Financial Planning Considerations/Differences
In contrast to families, single clients’ biggest priority is most often not the financial protection of a spouse and (perhaps) children. Because there is typically no one “in residence” with them to step in and provide health care or financial support to them, single people need to focus on resources (human and financial) to support their own care taking.
Their insurance focus needs to be on robust health insurance programs, disability insurance (to replace lost income) and longterm care insurance in the event those needs arise. Their investments often need to focus on income rather than long-term growth extending beyond their life expectancy. And they need to be mindful of the “single-supplement effect”, that is, that they miss out on the savings from shared expenses available to couples in terms of housing, food, travel and other costs.
For singles, the common default “joint account” arrangement available to couples is generally not available or desirable. Moreover, for many singles, issues about the desire for privacy and the justified fear of exploitation can make singles unable or unwilling to share information or ownership of assets. All of these factors make an organic and seamless transition of asset control in the event of disability or incapacity unavailable.
In my experience, singles must take thoughtful and directed action while healthy and mentally strong. In my experience, the must-have toolkit for singletons contains three legal documents (Keeping in mind that without the toolkit, expensive, intrusive and often contested Court proceedings are the only answer).
The singles toolkit includes:
- A Living Trust,
- A robust General Durable Power of Attorney (for financial matters); and
- A comprehensive Living Will/Healthcare Proxy (for medical decision making).
A Living Trust is a book in three chapters that allows for the care and control of assets from wellness, through incapacity and finally, in death. In Chapter One, the owner of the Trust, is mentally and physically capable and in charge of his/her financial affairs and can be the sole “Trustee” (controller of the Trust); in Chapter Two, the owner has become physically or mentally unable to handle his or her affairs alone and a trusted family member, friend or advisor is appointed to step in. And then finally, in Chapter Three, the owner has died and his or her pass according to the Trust – which then acts much as a traditional Last Will – but avoiding the probate process which can be expensive and lengthy. But the primary benefit for the singleton is the fact that its owner’s assets are already titled in the name of the trust and so that trusted designee is able to act without barrier at a time of greatest need.
The Durable Power of Attorney is a legal document that enables an individual to designate another person, called the attorney-in-fact, to act on his or her behalf regarding business and financial matters, even in the event the individual becomes disabled or incapacitated. For example, it allows for banking, selling of a home and arranging for a more appropriate living arrangement, or the hiring of an aide or other caregiver.
The Living Will/Healthcare proxy are legal documents in which a person expresses in advance his or her wishes concerning the use of medical treatment, including artificial life support should the person be unable to communicate such wishes at the end of life. The Medical Proxy then authorizes a previously chosen person (an “agent” or “health care proxy”) to make healthcare decisions on his or her behalf in the event of incapacity, and today includes an Authorization for Release of Protected Health Information (our HIPAA Release), specifically giving permission to medical providers to disclose personal healthcare information to the agent in accordance with Health Insurance Portability and Accountability Act of 1996, commonly known as “HIPAA”.
“Where do I begin?” is the most commonly asked (and stress-laden) question I am asked when a designee must step in to help. Whereas couples mostly know where their partner banks, where they work…the name of their boss/work colleagues, who their lawyer or accountant or doctors are, where their insurance information can be found, where their user names/passwords can be found, with singles, rarely is that information available. Preparing breadcrumbs can be the most important thing that the singleton must do. My list of best practices includes:
- Completing an information form to leave breadcrumbs for your designees (attached is the form that we have developed for this purpose);
- Tell your designees where you have left this form – and if on your computer, giving them the password or advice where the password can be found
- Consider user name/password online vaults
- Enroll in services like Docubank® which store your confidential documents online and provides you with a wallet card for access in an emergency – such as a hospital visit where they require a copy of your Living Will.
I hope that this information is helpful.