Many people mistakenly believe that if they don’t have children then estate planning is not important. In fact, the complete opposite is often true – estate planning is even MORE important if you have no children.
The misconception is phrased in one of many ways, such as:
“If I die, everything will pass to my spouse anyway, so why bother?”
“I’m single with not much in the way of assets, so why bother?”
“Estate planning is an expensive hassle and it doesn’t even benefit me because I’ll be dead.”
This kind of thinking ignores several facts about both estate planning and life in general. Regardless of your marital status, if you don’t have children, you face potential complications both during your life and after your death that can be addressed during the estate planning process.
If you don’t have children, consider these three inconvenient truths before you decide to forego estate planning.
Someone will get your stuff
Whether you consider yourself rich, poor, or somewhere in between, in the event of your death everything you own will be passed on to someone. Without documenting your asset transfer wishes in an estate plan, your assets will pass to the people that state law says should get your stuff. If you have no surviving spouse and no children, then that could mean brothers and sisters or nieces and nephews (or maybe even more distant relatives). If your extended family does not know that they have a right to inherit, then they may not step forward to claim their inheritance – leaving your estate in the hands of the Division of Unclaimed Property.
Or what if your family knows that they have a right to inherit but they are not aware of what is in your estate? Your family could go through the whole court-supervised estate administration process (which often takes a year or more to complete) and in the end not claim all the assets that are due to them. Again, this means that some of your estate may be transferred to the state’s Division of Unclaimed Property.
Without a well-organized estate plan in place your surviving family could be left without a clue as to how to start transferring your assets after your death. What we mean by a well-organized estate plan is that your plan not only documents where you want your assets to go after your death, but also provides an up-to-list of where your assets can be found – such as where you do your banking; the name of your financial advisor or where your investment and retirement accounts are located; copies of any life insurance policies; etc. By keeping a well-organized estate plan, your family will be able to start the estate administration process with a better head start than most other people.
If your estate plan does contain significant wealth and assets, your lack of planning makes conflict and in-fighting among your family more likely. Without clear directions from you regarding who you want to inherit and what you want those people to inherit – and without clear direction as to who should be in charge of supervising the estate administration process – your family will be left to figure out for themselves what to do. And unfortunately, the tendency is that where there is more money and assets at stake, the more willing people are to fight each other over who gets what. An estate fight can only drag out the administration process, and it leads to expensive court and legal fees – reducing the size of your estate along the way.
Even if you have a spouse and your assets get passed to him or her, there is not guarantee that the spouse will live much longer than you. In the event of your spouse’s death without an estate plan in place, state law directs that his or her blood relatives will inherit – leaving them subject to the same estate administration nightmares described earlier AND leaving your relatives without any inheritance of their own.
Someone will have power over your health care
Estate planning isn’t just about passing on your assets when you die. Some of the most critical parts of planning have nothing to do with your money at all, but are aimed at protecting you while you’re still very much alive.
Advance planning allows you to name the person you want to make healthcare decisions for you if you’re incapacitated and unable to make decisions yourself.
For example, if you’re temporarily unconscious following a car accident and unable to give doctors permission to perform a potentially risky medical treatment, it’s not always clear who will be asked to make that decision for you.
If you have a romantic partner but aren’t married and haven’t granted them medical power of attorney, the court will may very well appoint a blood relative, not your partner, to make that decision. Depending on your family, that person may make decisions contrary to what you or your partner would want.
Indeed, if you don’t want your estranged brother to inherit your property, you probably don’t want him to have the power to make life-and-death decisions about your medical care, either. But that’s exactly what could happen if you don’t make a plan.
Even worse, your family members who have priority to make decisions for you could keep your dearest friends away from your bedside in the event of your hospitalization or incapacity.
Even if, or maybe especially if, you don’t have kids, you need to do estate planning in order to name health care decisions-makers for yourself and provide instructions on how you want decisions made.
Someone will get power over your finances
As with healthcare decisions, if you become incapacitated and haven’t legally named someone to handle your finances while you’re unable to do so, the court will pick someone for you. The way to avoid this is by naming someone you trust to hold power of attorney for you in the event of your incapacity.
Durable power of attorney is an estate planning tool that gives the person you choose immediate authority to manage your financial matters if you’re incapacitated. This agent will have a broad range of powers to handle things like paying your bills and taxes, running your business, collecting your Social Security benefits, selling your home, as well as managing your banking and investment accounts.
Because these powers are so broad, it’s critical that you only give this power to someone you absolutely trust, and ideally, with the guidance of a lawyer who can watch out for your best interests.
The fact that durable power of attorney is valid even if you are incapacitated means your agent can handle your finances without waiting for a judge’s decision to declare you incapacitated. The time saved by avoiding court can be immensely beneficial to ensure your bills get paid on time and your estate is available to pay for your care at the most critical time.
Given all of these potential risks, it would be foolhardy for those without children to ignore or put off these basic estate-planning strategies. Identifying the right planning tools is easy to do, and begins with a Family Wealth Planning Session, where we can consider everything you own and everyone you love, and guide you to make informed, educated, empowered choices for yourself and your loved ones.
It will likely take just a few hours of your time to be certain that both your assets, healthcare, and relationships will be managed in the most effective and affordable manner possible in the event of your death or incapacity.
Disclaimer: This article is for informational purposes only and not intended as legal advice or to create an attorney-client relationship. Every situation is unique and consultation with an attorney is required before any specific advice can be given.