A common misconception is that estate plans are only necessary for those with a high net worth or big families. If you’re a single adult with no children, you might feel like you don’t need an estate plan — but that’s not the case.
Planning your estate is about more than transferring assets. It’s about creating a comprehensive plan that clearly outlines your wishes when it comes to your finances, health care decisions and end-of-life matters.
Without one, you’re essentially giving up control over everything you own and putting it into the hands of the law.
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Without an estate plan, state laws will determine who gets your assets. Oftentimes this could be distant relatives you may not be close to or in contact with, or even the state itself.
Wills vs trusts
Wills and trusts allow you — not the state — to decide where your money, property and possessions go, but they operate in different ways.
Your will is a legal document that outlines how your assets should be distributed after death, names an executor to manage your estate, and can designate guardians for dependents or pets.
However, a will only goes into effect once you die, meaning it can’t help with the management of your assets should you become cognitively impaired.
Trusts, on the other hand, essentially avoid probate, making it easier to transfer your assets in a more private and efficient transfer. Trusts can also take effect while you’re alive and can continue after your death.
You can even set conditions like gradual distributions or age-based inheritances. Unlike wills, certain types of trusts, like a revocable living trust, allow a successor trustee to manage your assets if you become incapacitated.
Who will benefit, and who should be your executor
If you don’t have anyone in mind to leave your assets to or manage your estate, it’s not a requirement when drafting these documents.
In fact, you can leave your assets to a charity or nonprofit, a church or even establish a scholarship fund or foundation to help those in need.
You can hire a professional executor, such as a trust company or bank that offers estate management services, a lawyer who specializes in estate administration, a CPA or even a financial adviser.
If no executor is named or no one is willing to serve as your executor, a court-appointed public administrator will be put in charge. This can be impersonal and costly.
If you choose to name a professional executor, you can provide specific details of that in your will or trust and your estate can cover their fees.
Making your health wishes known
Aside from finances and property, you should make your health care and end-of-life wishes clear. Creating an advance directive for health care, also known as a living will, details your preferences for medical treatment.
This includes decisions about life support, resuscitation, organ donation and palliative care, which focuses on improving your quality of life.
Your advance directive for health care can also provide instructions about end-of-life care, making sure your health care team adheres to those instructions if no one is advocating for you.
Similar to hiring a professional executor, you can also appoint a professional health care proxy, also known as a medical power of attorney.
A private fiduciary, elder law attorney or a professional patient advocate can serve in this role. Depending on where you live, you may also have the option to appoint an organization, such as nonprofit guardianship program, to serve as your health care proxy.
Geriatric care managers and patient advocates can also be hired to communicate your wishes on your behalf.
If none of those options appeal to you, you can also use an ethical will or letter of instruction that explains your values, legacy, final wishes, additional details on medical treatment preferences and funeral arrangements.
Be sure to provide copies of your health care directive and medical POA to your health care team, and consider keeping a digital copy in an easily accessible place.
Don’t give up control
No one enjoys making estate plans. They involve a lot of potentially hard conversations and decisions that can make it tempting to skip the whole process altogether. However, if you don’t have one, you’re giving up control of yourself and everything you’ve worked so hard for.
If you feel you don’t have anyone you trust to act on your behalf, don’t let that stop you from making an estate plan. There are many other options out there that allow you to communicate your wishes.
A financial professional or estate attorney can provide specific guidance tailored to your needs, allowing you to maintain control over your estate instead of giving that power to the law.
Cynthia Pruemm is an investment advisory representative of and provides advisory services through CoreCap Advisors, LLC. SIS Financial Group and CoreCap Advisors are separate and unaffiliated entities.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.