Estate Planning is Not “One Size Fits All”
Married, never married, widowed, divorced—each of us has unique needs when it comes
to how and to whom we make our bequests. Here, in a brief discussion, are a few
checkpoints for developing an estate planning strategy for people who are on their
Review your will regularly
The passage of time and changes in personal circumstances, or in your investment,
business or real estate holdings, as well as in the economy and the law, all may
wreak havoc with your will and the ways that you have decided to transfer your assets.
Remember, too, that not all of your assets pass by way of your will. Property held
jointly with a right of survivorship passes outside your will. Retirement
plan benefits and life insurance will be paid to whomever you named on a beneficiary
designation form. Make it a point to review your designations regularly. Often there
are circumstances—a beneficiary’s death is one example—that may require you to make
Establish a program of gifts
If you have substantial assets, consider making “annual exclusion” gifts. You can
make gifts of up to $11,000 a year to as many people as you wish, gift tax free.
Why? The gifted cash or property, no longer part of your estate, cannot be taxed
at your death. And you will be able to enjoy seeing the results of your generosity.
However, the gifts must be of a “present interest”—the person receiving the gift
must be able to use the money or property now, not just at some later time.
The tuition and medical expense exclusions allow you to help out family members
or friends with these expenses without gift tax consequences. If it’s tuition, be
sure to make the payments directly to the school, not the attendee. There is no
cap on how much you may give, tax free. Similarly, you can defray someone’s medical
expenses if you make the payments to the health care provider. These amounts are
nontaxable without limitation as well. (Amounts reimbursed by insurance are not
eligible for this exclusion.)
Plan your charitable gifts
Be sure to consult your advisors if you will be making a substantial gift to charity.
You’ll want to fashion your gift to take maximum advantage of the tax breaks available.
The charitable bequests that you make in your will won’t be subject to estate tax.
But there are more tax benefits that may be available by taking an organized approach
For example, if appreciated securities are sold to fund a charitable gift, you will
realize long-term capital gain, and there will be tax to pay. When you donate the
securities directly to the charity, and the charity sells the shares, no tax will
By setting up a charitable remainder trust, you can make a substantial gift and
reserve income payments from the trust for your life. (If you set up the trust in
your will, you may name someone to receive the income.) And you will be able to
treat part of your gift as an immediate charitable deduction. A charitable lead
trust works in reverse: The charity receives the payments for a specified number
of years; then the remainder passes to the beneficiaries that you have designated.
Make sure someone can “step in”
Consider naming someone to take control of your financial life if a disabling illness
or injury occurs. With a durable power of attorney, you delegate the duties and
responsibilities as outlined in the durable power document.
In theory, a durable power should work for you as long as you remain disabled. Unfortunately,
sometimes third parties will refuse to honor an apparently valid durable power of
attorney simply because some time has passed since the power was created.
A living trust may offer more comprehensive financial protection and security. You
can create the trust now but continue to control the assets that you place in the
trust. The trustee takes over investment management and other important financial
decisions only if and when you become disabled. The trustee that you name will act
only as you have directed in the trust agreement. The trustee’s responsibilities
may be as far-reaching as managing your investment portfolio or as routine as paying
your household bills while you are incapacitated.
Without executing a durable power or a living trust, court proceedings may be necessary
in order to name a guardian to manage your finances. The process can be time consuming
and often costly, and the proceedings are public, there for anyone to scrutinize.
Have a medical emergency plan in place
Closely allied to questions of financial decisions in the event of incapacity are
questions of medical treatment decisions. An advance medical directive allows you
to exercise control over your medical care in the event that you cannot make decisions
A living will lets you express your wishes regarding your care should you
be in a terminal condition and, generally, deals with questions concerning what
life-sustaining treatments (if any) should be undertaken. With a durable power of
attorney for health care, you delegate someone to make major health care
decisions for you, based upon your directions.
Obtain a second opinion
Estate planning, in at least one respect, may be more difficult for a single person
than a married couple—you face some difficult decisions alone. Family and friends
may be helpful, but it’s especially important as well to gather together a professional,
trustworthy team of advisors. They can provide the benefit of a reliable second
opinion, when you need it.
We would be pleased to serve on your estate planning team.