New York Estate Planning & Elder Law Blog
Most of the estate planning tips and tricks revolve around plans for couples; however, a single person’s estate plan is just as important. In many circumstances, the way that a single person structures their estate plan and who is named differs from an estate plan of a couple. Just as with couples, if a single person fails to properly plan there can be dire consequences for an estate.
Dying Without a Will
If a single person dies without a will, then they are considered intestate. All of the assets in their estate go into probate, and the court will disperse the assets according to state law. Because there is no spouse, typically the court will split the estate between any children, parents, and siblings. If there are no close living relatives, then all of the assets in the estate are forfeit to the state. This worst case scenario highlights the importance of titling various assets, beneficiary designations, and how an estate plan can help a single person.
Estate Planning Essentials
Even having the basic, essential estate planning documents can drastically affect the outcome of your estate. This is even more important if you have a committed, non-married partner or have plans to distribute your assets that are not in accordance with state law. A basic estate plan can also help a single person in the case that you become incapacitated physically or mentally.
The most important estate planning tool is a will. This dictates what assets should go to what people or organizations after your death. You can also use a will to name guardians for minor children and assign an executor to the estate. If you do not have any close relatives, consider a close friend or attorney to be the executor of your estate.
Another important aspect of a single person’s estate plan is a durable power of attorney. This document names someone to make all of your legal and financial decisions in case you become incapacitated and cannot make decisions on your own behalf. A married person usually names a spouse, but a single person needs to consider who they believe will make the most informed choices for them.
Finally, consider using accounts for your estate plan that name a beneficiary, and then put time into considering who you wish to inherit those accounts. Beneficiary designation accounts include retirement accounts, IRAs, 401(k)’s, life insurance, annuities, and more. However, you should review and update beneficiary accounts every few years to ensure that they are up to date.
Planning for Estate Taxes
Federal estate taxes do not apply to a single person’s estate until it surpasses the exemption level, which for 2015 is $5.43 million. If you are single because you are widowed, the federal exclusion amount can also include the unused tax amount from your deceased spouse. However, you must also consider state estate taxes or inheritance taxes. These exemption levels can be much lower and the tax rate much higher than the federal level. It is important to check and see if your state’s estate taxes will apply to you.