Many people leave their assets to loved ones in their estate plan, but what happens to the assets of those who have no family to support? It’s still very much a priority to make sure everything you’ve worked for goes where you would want it to, and just because someone has no family, doesn’t mean they can’t leave behind a lasting legacy.
The unfortunate news is that one out of every four people will end up living with some form of incapacity. Family members usually wade in to help during those times. If you don’t have family, you’ll need to think carefully about who should make health care decisions for you if you can’t. Complete a health care directive right away. Every state has its own form of health care directive, and you can usually find them online. Go a step further and help your agent by giving specific instructions about the kind of treatment you want – or don’t want. The “Your Way” form available at Help4srs.org is a terrific way to organize these thoughts.
If you become incapacitated, someone will need to help pay your bills and manage your assets, such as retirement plans and life insurance policies. Use a power of attorney to identify the person you trust to do this. Every state has its own form of power of attorney, and you can usually find them online. Just make sure yours is a durable power of attorney. That means it will last even if you become incapacitated. Unless your document specifically says it is durable, it will terminate when you become incapacitated, which is exactly when you need it to be effective.
If you don’t expect family members to help you, then find a fee-only financial advisor, a tax preparer and an attorney and talk specifically with them about creating a security net for yourself. Working together, those three advisors will be able to watch out for your financial well-being. Consider adding a geriatric care manager to your team of advisors so someone will be on deck for helping with health care issues.
The best planning is almost always the simplest planning. If you don’t have family, make a list of the ten friends and organizations who have been important to you and divide your assets among them using percentages. Don’t try to plan for every eventuality. If, for example, you decide you want 10% to go to a nephew, just say that. Avoid giving a variety of instructions that apply in case he dies first. Those instructions are the ones that lead to bitter arguments. Instead, revisit your instructions once a year and make changes as necessary.
Every state has a default set of rules that say who gets your assets if you don’t leave your own instructions. These rules search for your “next of kin.” This is how people inherit from the Great Great Aunt Gertie who they’ve never even met. Don’t rely on these rules. Get a will done. A lawyer can write one for you. Or you can find your state’s statutory will form online and fill it in yourself.
The bitterest disputes that happen when the “next of kin” rules apply (mentioned above). A distant family member who finds himself in line to inherit may be uncommonly susceptible to lawyers who promise to help him get more from Great Great Aunt Gertie’s estate. Reduce this risk by including a “no contest” clause in your documents that says anyone who argues gets nothing. These clauses are not bulletproof, but they help.
The person who makes health care decisions for you, manages your financial affairs or helps distribute your assets has a very tough job. This is not an honor you are bestowing on that person. You are asking this person to commit significant amounts of time and energy to help you. Don’t make this choice lightly. Consider giving this job to a trust company or a professional fiduciary.
On average, if someone under age 65 needs care assistance, the need will only last 30 days, but for someone over age 85, the need will last for about 3 years. The cost of round-the-clock care averages about $6,500 a month. That means 3 years will cost about $235,000. That’s expensive, but it’s much lower than you might expect given all the hype about the costs of long-term care. Many people can self-insure for this cost. If you can’t, explore buying long-term care insurance.
As we get older, the idea of a steady monthly income becomes increasingly attractive. But beware of commercial annuities. Once your money goes into one of these contracts, you cannot get it back out. Although rates of return are higher than certificates of deposit, these assets can lead to unbelievably high tax bills after death. If you’re considering an annuity, explore the possibility of a charitable gift annuity or a pooled income fund, both of which can bring higher than average rates of return.
If you’ve got retirement plans or life insurance policies, check the beneficiary designations regularly. If you happen to name someone who dies before you, the plan administrator or insurance company may freeze the assets until a court issues an order identifying the proper recipients. Check your beneficiary designations every year, and sign new designations every 5 years even if your instructions stay the same to prevent concerns over a “stale” designation.
An estate plan is a personal thing, so make sure your assets go where you would like them to after you’re gone. Trusting those who are put in charge of caring for those assets is important and you should make a comprehensive plan for how you would like them to be distributed, whether or not you are leaving them to your family.
More expert advice about Estate Planning
Photo Credits: © Kurhan - Fotolia.com; Check Man, Cross Man and Jump Man © ioannis kounadeas - Fotolia.com