Introduction
When it comes to estate planning, many seniors turn to their adult children for assistance, naming them as agents, executors, and beneficiaries. Childless seniors don’t have that ability. Instead, people in this position tend to rely on their spouse. Unfortunately, relying on your spouse doesn’t account for what will happen when your spouse passes away, or if both you and your spouse pass away together. To prepare for these contingencies, childless seniors will need to look to siblings, extended family, friends, and trusted advisors.
Designating Beneficiaries
This is often the first thing childless seniors think about when considering their estate plan. For married couples, the default scenario is to set up mirroring wills so that each spouse stands to inherit the full estate when their partner passes away. Then, when the surviving spouse passes away, your will can direct your assets to siblings, nieces, nephews, friends, or a charity.
Authorizing a Financial Agent
If you become incapacitated—perhaps due to illness, accident, or simply due to old age—you will need an agent to access your finances, pay your bills, and make important decisions on your behalf. Your spouse doesn’t need special permission to do this, but anyone else would require a durable power of attorney. When choosing a financial agent, pick someone who is financially savvy, consistent in paying their bills, and frugal when it comes to spending and saving. Because this offers full access to your assets, it may not be wise to use a friend or neighbor for this job. Instead, look to siblings, extended family, or a trusted advisor.
Authorizing a Healthcare Proxy
Similarly, if you are incapacitated and unable to communicate important medical decisions, you’ll want to have a healthcare proxy with a healthcare power of attorney who can speak with doctors on your behalf. Additionally, draft a living will (also known as an advance healthcare directive) to document your treatment preferences. A living will can be as broad or as specific as you’d like—you can authorize any and all treatments to save and prolong your life, or you can list what you don’t approve of. Your healthcare proxy will be bound by the directions in your living will. For this role, it’s best to go with a close friend or family member who knows you well enough to understand your healthcare preferences, and who respects you enough to follow your wishes even if they disagree.
Nominating an Executor
In your will, you have the opportunity to name an executor to manage your estate when you die. This individual, also known as a personal representative, will be tasked with gathering your assets, settling your liabilities, filing your final tax returns, and distributing assets to your beneficiaries. As with your financial agent, this person will have full access to your finances, so you’ll want to nominate someone who is trustworthy. A popular choice for this responsibility is to use a trusted financial advisor or attorney, or a sibling who is financially savvy. It’s also wise to include a backup executor in your will, just in case your primary executor passes away before you.
Appointing a Trustee
Sometimes a will doesn’t resolve all of your estate’s needs. In those cases, establishing a living trust may be advisable. Where a will offers instructions on how to transfer your assets through probate, a trust actually takes possession of your assets and transfers them to your beneficiaries without going through probate. For most living trusts, the person gifting the assets (known as the grantor) serves as the trustee and the beneficiary, allowing them to maintain full control and access to assets transferred to the trust. The trust will also name a successor trustee who will take control of the trust when the grantor dies, and secondary beneficiaries who will receive the assets. If you’re concerned about end-of-life incapacity, you can also include a disability trustee to manage the assets if you are ever unable to handle your own affairs. If you have a sizeable estate with a diverse portfolio of investments, you may want to consider hiring a trust management company to oversee the trust. A trusted financial advisor is a good choice, too.
Updating Your Estate Planning Documents
Once you establish your estate plan and sign the documents, it’s important to review your plan regularly. Most estate planning attorneys recommend holding an annual review to consider if any major life events or changes necessitate amending your plan. If you determine that changes need to be made (such as adding a new beneficiary), your will is easy to amend with a codicil. If major structural changes are required, you can redraft a new will to replace your existing one. Revoking a power of attorney or adjusting your advance healthcare directive is also fairly simple. When it comes to trusts, however, it can be difficult to amend or dissolve the trust agreement. Therefore, before you establish a trust, be sure to consider any future contingencies that may require you to revoke the trust, and consult with an attorney to make sure the trust document allows for adjustments under those circumstances.
What Happens if a Childless Senior Dies Without a Will?
If you pass away without a will, you die “intestate,” and your assets will pass to your heirs according to the state’s intestacy laws. Based on your situation, a probate judge will declare who will receive an inheritance from your estate. If you’re married without children, all of your assets will pass to your surviving spouse. If you’re single without children, your assets will be distributed in the following order:
- Parents
- Siblings
- Extended family
Can Joint Assets Bypass Probate?
Financial accounts that are set up as joint with rights of survivorship (JTWROS) will transfer to the surviving account owner when the first account owner passes away. Real estate owned as joint tenants or as tenants by the entirety will also pass to the surviving owner without probate. The only exception is real estate owned as tenants in common—in that case, the decedent’s share in the property would be distributed to the surviving owners through probate.
Can Any Other Assets Bypass Probate?
Not all assets are subject to probate. In addition to JTWROS accounts and property owned in joint tenancy or tenancy by the entirety, the following assets can transfer to your beneficiaries without going through probate:
- Bank or brokerage accounts with a transfer-on-death (TOD) or payable-on-death (POD) beneficiary
- Retirement accounts (401k, IRA, etc.)
- Life insurance policies
- Trusts
For long-term peace of mind, contact us to set up a consultation today. We look forward to helping with your will and other estate planning needs.
Call our Estate team at (480)467-4325 to discuss your case today.