Don’t get stuck on the “who.” Estate planning when you don’t have children
As more and more people make the choice not to have children, it is increasingly important to consider their needs in retirement and after death. It is easy for people without children to get stuck on the “who” in their estate plan. Remember, just because you don’t have children, doesn’t mean you don’t have any heirs.
Where to start
For many individuals without heirs, estate planning is a unique opportunity to reflect on their personal values and life goals. Here are some great questions to start your conversation:
What are your goals for your retirement/later years? Do you want to live somewhere specific, travel internationally, exploring new hobbies?
What are your financial goals for your estate? Is minimizing estate taxes your priority? Do you want to avoid probate? Are you concerned about conflict?
What is important to you when you think about your legacy? Do you have found family that is part of your community? How to want your beneficiaries to inherit (i.e. direct versus trusts for specific purposes such as education)?
Finally, are there causes or organizations that have been near and dear to you or loved ones?
How we can accomplish these goals
Retirement goals
Planning for Incapacity: Designate a trusted person to make financial and healthcare decisions on your behalf if you become unable to do so yourself via a durable power of attorney and healthcare power of attorney/advance directive.
Funding Healthcare and Long-Term Care: Account for potential medical expenses and long-term care costs (which Medicare often doesn't cover) to protect your savings from being depleted.
Maintaining Financial Stability: Ensure your retirement savings and income streams last throughout your lifetime by aligning your estate plan with a sustainable withdrawal strategy.
Estate Financial goals
Minimizing Taxes: Employ strategies like gifting, setting up specific types of trusts (e.g., Roth conversions of IRAs), and strategic beneficiary designations to reduce or avoid estate and inheritance taxes for your heirs.
Avoiding Probate: Structure your estate (often using trusts or proper beneficiary designations) so assets can pass directly to heirs without a lengthy court-supervised probate process.
Preventing Family Disputes: Use clear, legally binding documents and open communication with friends and family to avoid confusion, disagreements, and potential legal battles over your estate.
Ensuring Orderly Administration: Appoint a reliable executor or trustee to manage your affairs, pay debts, and distribute assets efficiently according to your instructions.
Protecting Assets: Safeguard your wealth from potential lawsuits, creditors, or mismanagement through proper planning and asset titling.
Legacy goals
Designating Beneficiaries: Consider siblings, nieces, nephews, or cousins. You can also make provisions for their children's education or a first home purchase. Leave a portion of your estate to close friends who you consider family. For some people, close friendships can be more important than family connections. You can officially recognize these individuals in your estate plan.
Providing for Loved Ones: Secure the financial future of a surviving spouse, chosen family, or extended family, potentially by using trusts to manage their inheritance, especially for minors or those with special needs.
Educational trust: Fund scholarships or educational programs for aspiring students. This could be through your alma mater or an independent scholarship fund.
Seed fund trust: Create a trust to help young beneficiaries, like a niece or nephew, with life milestones, such as a down payment on a house or a wedding.
Pet trust: Ensure your beloved pet is cared for after you're gone by setting up a trust to pay for its care. You can name a trusted friend or family member to be the caretaker.
Creating a Legacy: Define your values and how you want to be remembered, whether through supporting a family member's education, or making charitable donations.
Charitable bequest: The simplest way to support a cause is to leave a portion of your estate to a charitable organization in the distributions in your will.
Charitable remainder trust: This strategy can provide you with income during your lifetime while you transfer assets to an irrevocable trust. After you die, the remaining assets go to your designated charity, and your estate receives a tax deduction.
Charitable lead trust: With this trust, a charity receives income from your assets for a set number of years. The remaining assets then go to your other designated beneficiaries.
Donor-advised fund (DAF): A DAF is an investment account dedicated to charitable giving. You contribute assets, receive an immediate tax deduction, and recommend grants to qualified charities over time.
What happens if you don’t have an estate plan
Without a will or trust, your estate passes according to the rules of intestate succession. This means that your estate goes to your closest relatives or ultimately the state of Washington if you have no surviving relatives. Here’s the hierarchy under Washington law:
Surviving spouse and children: The spouse gets all community property and one-half of the separate property. The children inherit the other one-half of the separate property.
Surviving spouse only (no children): The spouse inherits all community property and all separate property.
Children only (no spouse): The children inherit the entire estate.
Parents only (no spouse or children): The parents inherit the entire estate.
Siblings only (no spouse, children, or parents): The siblings inherit the entire estate, divided equally.
Other relatives: If there are no surviving spouse, children, parents, or siblings, the estate goes to more distant relatives like grandparents or cousins, following the hierarchy of kinship.
State of Washington: If there are no living relatives, the estate escheats (goes) to the state.
A good estate plan ensures that your estate goes to the individuals and organizations that are important to you. Even without heirs, you have the freedom to craft an estate plan that ensures their story and contribution to the world lives on in a way that is meaningful to them. Start the conversation with us today!