Estate planning is an essential part of anyone’s financial plan. I’ll explain in this article why it’s critical for single women.
If you don’t have a proper plan in place, your state’s laws will dictate who receives the assets under your estate. State laws usually designate beneficiaries in this order: spouse, children, grandchildren, parents, grandparents, siblings, aunts, uncles, nieces, nephews, and cousins. If you have children and die without a will, the state will decide who the guardian will be. This is all true even if you’re in a relationship without being legally married.
Suppose you’re hoping to designate your possessions to a significant other, extended relatives, close friends, or charitable organizations. In that case, it’s critical to put together an estate plan. And more importantly, to appoint a person for your children’s guardianship, creating a will is a crucial step. Thankfully, this is easier than it sounds. The following is a list of primary estate planning documents and their purpose:
Will or living revocable trust
Although these titles are often used interchangeably, wills and living trusts are two different documents. The most significant difference: both transfer an estate to designated heirs, but only trusts skip over the probate court. Plus, a will lays out your wishes for after you die while a living revocable trust becomes effective immediately and can be revised anytime while you are living.
Suppose you are a woman with significant assets. In that case, a revocable living trust will keep your assets away from court-supervised distribution. If you have a more modest estate, a will may suffice.
A living revocable trust also helps your beneficiaries avoid the hassle and expense of a lengthy probate process. Living revocable trusts have benefits, but they cost more to create and require management. The choice between a will and a living trust is a personal one. Whichever path you take, it’s always a good idea to seek the advice of professional advisors.
Healthcare proxy/durable medical power of attorney
As the name suggests, this type of power of attorney deals strictly with your health care decisions and medical treatments. With your healthcare proxy document, you’ll appoint an agent to make healthcare decisions on your behalf if you’re incapable of making them on your own. This is an important responsibility, and it’s essential to choose someone you trust and be transparent with them on the specifics of your wishes.
The financial power of attorney
While the medical power of attorney or healthcare proxy deals with health specifics, the financial power of attorney deals with financial matters. Your financial power of attorney document grants another individual the power to make financial decisions for you while you are alive but not capable of handling things yourself.
Your power of attorney is your legal representative for financial matters. Should you be hospitalized or incapacitated, they’ll handle financial tasks, like managing your bank accounts and paying your bills from a designated account. You can choose to designate a power of attorney that is effective immediately or kicks in after a specific event occurs (ex. coma, Alzheimer’s, mental disability, or an inability to communicate your wishes directly).
The Challenge Of Naming Representatives
It is one thing to get the will, living trust, financial and healthcare powers of attorney created. The other challenge is to decide who will be your legal representatives. Married couples usually name each other, but being single, you need to decide who will handle your affairs and find out if they are willing to do it. If you have a will, you will need an executor, and if you have a living trust, you will need a successor trustee. Then you will need to choose your powers of attorney for health and finances. Most people choose from personal relationships, but it’s also possible to hire professionals for these roles. As you are preparing to start your estate planning, besides organizing your financial assets, it’s just as important to decide who will represent you.
If you’re a single woman and want to talk about your estate plan with a trusted financial planner, please connect with us. We are here to help.