Why do single people need estate planning?

If you are single, with no kids, and very little assets, you should still have some basic estate planning documents in place.  The default rules that state law provide may not be desirable for you.

As a bare minimum, estate planning should provide documents that: (1) instructs who will inherit from you, (2) names who will be in charge of handling your affairs after death, (3) names who will be in charge of handling your affairs if you become incapacitated, and (4) names who will make your health care decisions if you become incapacitated.  Therefore, at a minimum, everyone should have THREE documents:  (1) a Will, (2) a Durable Power of Attorney, and (3) a Health Care Power of Attorney.

Will

A Will names a Personal Representative to handle your final affairs and states who will receive whatever you may own.  Dying without a Will is called dying "intestate", and the distribution of your assets will be governed by North Carolina's "intestacy" statutes.  If you have a child or children, then your child or children will receive everything.  If have no children, then your parents would receive everything.  If you have no children and no living parents, then the recipients of your stuff could be siblings, nieces and nephews, grandparents, aunts, uncles, or cousins (essentially your closest next of kin).  If you want to give anything to a friend or significant other, a Will is a must. 

If there is some reason to prevent your stuff going to your next of kin, then a Will is a must.  For example, if your father is receiving Government Benefits to pay long term care expenses through Medicaid, then allowing him to inherit anything from you would be wasteful.

Durable Power of Attorney

The Durable Power of Attorney (DPOA) grants someone the legal authority to act as your agent.  This document allows someone to manage your financial affairs for you, which would be necessary if you ever become incapacitated.  A single person who become incapacitated without a DPOA in place will have an unpleasant Court encounter.  For example, if your Mother is willing to handle your financial affairs if you become incapacitated, then to do so, absent a DPOA, she will have to sue you to have a Court declare you legally incompetent.  She will also have to petition the Court to be named as your Guardian.  As your Guardian, she can manage your affairs, but she will have to account to the Court each year on how she used and managed your assets.  A properly drafted DPOA can keep you out of the Court system by proscribing a private method of determining your capacity.  Alternatively, the question of your capacity can be sidestepped by making a DPOA effective upon signing.

Health Care Power of Attorney

Much like the DPOA, a Heath Care Power of Attorney (HCPOA) grants someone the legal authority to make your Medical Decisions.  Again, absent an HCPOA, you would have to be sued and someone appointed Guardian for you.  The DPOA and HCPOA work together to keep you out of the Court system if you become incapacitated.

Additional Documents

Additional documents to consider for a single person include a Revocable Living Trust, a Living Will and a HIPAA Medical Release form.

A Revocable Living Trust can be used to avoid Probate if privacy is a major concern for you.  A Living Will allows you to state your wishes about your life being artificially prolonged, and a HIPAA Medical Release form will make it easier for your loved ones to learn your condition if you are hospitalized. 

Conclusion

Single persons should have estate planning documents in place to avoid costly and embarassing Court procedures if incapacity occurs and to direct purposefully who will receive the assets at death and appoint someone to make sure the final affairs are properly managed.

Long-Term Care Insurance

Long-term care is the type of care that you may need if you can no longer perform “activities of daily living“ by yourself, such as eating, bathing or getting dressed. It also includes the kind of care you would need if you had a severe cognitive impairment like Alzheimer’s disease.

If you, your spouse or family member were to need long term care, the cost could deplete more than your own hard-earned assets. However, long-term care can be covered completely or in part by long-term care insurance. Without long term care insurance, the financial burden of caring for you could fall on your family. Most long-term care insurance plans let you choose the amount of the coverage you want, as well as how and where you want to use your benefits. A comprehensive plan includes benefits for all levels of care, custodial to skilled.

Long-term care is not the type of care that you receive in the hospital or your doctor’s office. It is not the medical care you need to get well from a sickness or an injury, and it isn’t short-term rehabilitation from an accident or recuperation from surgery. Care can be received in a variety of settings, including your own home, assisted living facilities, adult day care centers or hospice facilities.

The Increasing Need for Special Needs Planning

There is no doubt that the need for special needs planning is increasing. Just look at these statistics:

• In 1992, there were 15,580 children ages 6-22 who were diagnosed as having what is now called an Autism spectrum disorder. In 2006, the number was 224,594.
• In 2006, there were an estimated 24.9 million adults in the United States with serious psychological distress. (see note 1)
• Approximately 4.4 % of U.S. adults may have some form of bipolar disorder during some point in their lifetime. (see note 2)
• In 2006, an estimated 22.6 million people in the U.S. (9.2% of the population age 12 or older) were substance dependent or abusive in the previous year. (see note 3)

Almost every family has at least one member (child, grandchild, nephew, niece, parent, grandparent) who will always need help managing personal care and/or finances. And since most of these conditions do not decrease life expectancy, many families are seeking answers on how to provide the best quality of life for their loved ones for the rest of their lives . . . which could, for a young child, be 70 years or longer.

Fewer Programs Are Available

At the same time that the need for support services is increasing, government and non-government programs are being reduced and even eliminated due to the strain on state budgets, competition among entitlement programs, and pressures to reduce deficit spending. Once a program is cut, it may be difficult if not impossible to restore it in the future.

Families Are Motivated

Even families who are using them now do not trust that the programs that are benefitting their special loved one will be there to provide the needed benefits in the future. They are wisely (and fearfully) looking at alternatives to provide those services. Common concerns are:

• Who will care for my loved one when I am gone?
• Who will be my loved one's advocate?
• Where will my loved one live?
• How much independence can be maintained?
• Will the money last for my loved one's lifetime?

Preserving Government Benefit Entitlement

Are government benefits for a special needs person worth preserving? For families of lesser means, the answer is almost always, "Yes, absolutely!" For more affluent families, however, maybe not.

It may be better to privatize the special needs person's care instead of spending thousands of dollars to protect a few hundreds in benefits that may not be available in the future. In the past, many practitioners focused exclusively on preserving public benefits at all costs. Today, special needs planning is not necessarily "poverty planning."

The proper focus today is, on a case-by-case basis, how to provide the best quality of life throughout the life of the loved one.

1. http://www.oas.samhsa.gov/NSDUH/2k6NSDUH/2k6results.cfm
2. http://www.pendulum.org/bpnews/archive/001884.html 
3. Based on criteria specified in the Diagnostic and Statistical Manual of Mental Disorders, 4th edition (DSM-IV)

Disability Planning

It's a fact that most of us will need some kind of assistance with our daily living activities for at least some time before we die. This kind of care can be provided in your home, in an assisted living facility, or in a nursing home. All can become very expensive.

Home health care can easily run over $20,000 per year. That's at $16 per hour, for just 25 hours a week.

Depending on the skill required, number of hours needed and where you live, it can cost considerably more. Assisted living facilities can cost more than $25,000 per year; the more services you need, the higher the cost. Nursing home facilities, with round-the-clock care, are easily $50,000 or more a year.

Take a look at these statistics for Americans age 65 and older:

• 43% will need nursing home care;
• 25% will spend more than a year in a nursing home;
• 9% will spend more than five years in a nursing home; and
• the average stay in a nursing home is more than 2.5 years.

Planning Tip: Most insurance plans and Medicare do not currently cover long-term care. That means the cost will need to be paid from your assets. Consider purchasing a long-term care insurance policy to protect your assets.

Besides the cost of long-term care, you may also be concerned about who will provide the care you need and where you will receive it. You may prefer to stay in your home for as long as possible, or you may enjoy the companionship and social aspects of an assisted living facility. However, incapacity can deprive you of the ability to make your desires known and implemented.

Planning Tip: Your trust can include disability provisions that will make sure your desires are clearly expressed and carried out. It's best to take care of this now, while you are able to communicate your wishes.

HIPAA

The HIPAA (Health Insurance Portability and Accountability Act) regulations require that every patient sign another consent form, which gives providers permission to use and disclose a patient's protected health information for the purpose of treatment, payment and health care operations. If patients refuse to sign this consent form, providers are not required to treat them in most cases. In fact, it probably would be next to impossible for a caregiver to do so without having access to critical facts about the patients' condition. Your estate planning documents including your powers of attorney and your revocable living trust should include provisions to address the HIPAA requirements and allow those you have chosen to permit disclosure of your health care information.