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Estate PlanninG
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Why Single People Should Make an Estate Plan

It’s not pleasant to think about, but a time may come in our lives when we’re unable to make financial or medical decisions for ourselves. If you haven’t outlined who will make these decisions for you in a properly executed document, the court will make this decision for you. They may choose someone who you wouldn’t have necessarily been your top pick.

As a single person, you may not have the option to choose a significant other to step in and make decisions on your behalf if you’re unable to. You might also not be sure who’s going to receive your money and property when you die. Sure, you may consider your parents and siblings, but depending on where they live or the nature of your relationship, they may not be ideal options.

That’s why it’s especially important for single people to create an estate plan. Having an estate plan will help you make sure your wishes are carried out during your life and after your death.

What Are the Roles I Need to Fill?

Here are two of the most important roles you should fill to properly protect yourself:

Agent under a Financial Power of Attorney

This individual will carry out financial transactions (such as signing checks or opening a bank account) on your behalf. The duration and scope of this person’s authority are spelled out in the financial power of attorney. This person should be responsible, detail-oriented, and have the time to dedicate to the role. If you can’t think of a friend or anyone in your family who you would trust enough to manage your finances, don’t worry. You can hire professionals to assist you.

Agent under a Medical Power of Attorney

This individual will communicate or make medical decisions on your behalf if you’re unable to do it yourself. These decisions are extremely personal and can be heavy, so it’s better to carefully think about who will fill this position, rather than letting a judge choose for you. When choosing this person, make sure it’s someone who will honor your wishes regarding medical decisions and that they’ll have the time to make or communicate them. If you can’t think of a trusted family member or close friend to do this, you can hire a professional. Keep in mind, however, that state law may prevent certain professionals (such as doctors) from acting as an agent.

Who Will Receive My Assets?

If you don’t have an estate plan prepared, your state’s intestacy statute will determine who receives your money and property (owned solely by you and not controlled by a beneficiary designation) and the amount each legal heir will receive. These laws vary by state, but in California, if you die with children but no spouse, your children inherit everything. If you don’t have children, a spouse, or siblings, your parents inherit everything. Read more about California’s laws here.

If you have a life insurance policy and haven’t designated a beneficiary, the proceeds from the policy may be paid to your estate. This would necessitate the often costly and time-consuming probate process, or may go to individuals according to the order outlined in the policy agreement.

Similarly, if your retirement account doesn’t have a named beneficiary, it may also be subject to probate. This may cause unintended income tax consequences.

Proper Tax Planning for Single People

The federal tax system gives preferential treatment to people who are married. Married couples can take advantage of the estate tax marital deduction and transfer an unlimited amount of money and property, tax free, to the surviving spouse when one spouse dies. Additionally, married individuals are allowed to add any remaining part of their deceased spouse’s exemption amount to their own exemption amount. As a single person, you have only your lifetime exemption ($11,700,000 in 2021).

Similar to a married individual, you can give away up to the annual exclusion amount ($15,000 in 2021) without having to file a gift tax return and pay gift tax. However, married individuals can make larger gifts and split the amount between them. For example, Spouse 1 and Spouse 2 can give $30,000 to their child without having to pay gift tax. In this case, a return may still be necessary, but if Spouse 1 and Spouse 2 agree to split the gift, each is technically giving only $15,000 to their child.

Because you can use only your lifetime exclusion amount and the annual exclusion amount, if you are very wealthy, you may need to engage in tax planning earlier and it may be more complex.

We’re Here to Help You Figure it Out

Completing your estate plan will give you control over what happens to you and your estate during your life and death. Estate pans are complex and highly personal, and can be drafted in a number of different ways to make sure your unique wishes are carried out.

We can help you protect your legacy and ensure the people and causes you care about are provided for. Call Santaella Legal Group, serving San Ramon, Danville, Dublin, Pleasanton & the Tri-Valley area, at (925) 831-4840.

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