In Michigan, estate planning is essential to an overall financial plan, regardless of your relationship status. A single person with no heirs may think they do not need a will, but if they die without one, the state decides who gets their assets and in what order. Even if you do not have a spouse, children or other heirs, estate planning is crucial to solid financial management.
Determine who should receive your assets
People with a spouse or children have a more straightforward situation regarding estate planning. If they should die, they have immediate beneficiaries for their assets. Single people often do not have direct heirs, and planning their estate provides directives for how to distribute assets according to the individual’s wishes.
You may wish to leave your money to various charities or a cherished friend. Your assets, including your owned real estate, could end up in the hands of a distant relative you have never met if you do not decide and document what should happen with your assets.
Create a will (and possibly a trust)
Creating a will allows you to provide directions to a trustee on how you want your assets distributed. Establishing a trust will enable you to give more detailed guidance on handling your assets.
It also allows your assets to pass to beneficiaries without the time and costs of going through the probate process. Your will is still necessary, as it provides directions for any additional assets you might have erroneously excluded from the trust.
As a single person, you can designate a good friend, a charity, a neighbor or anyone else you would like to have your assets. Some financial instruments, such as insurance, a 401(k) or an IRA account, require identifying a beneficiary when setting up the account. This beneficiary designation overrides anything stated in your will. All other assets will go to the beneficiaries you specify in your will.
Get in the habit of checking your beneficiaries periodically. If you were married previously, verify that your ex-spouse is no longer a beneficiary on your retirement or insurance accounts. You might have chosen a friend or a charity near and dear to you at one point, but your current life may include different people and organizations to whom you want to pass your assets.
Understanding estate planning can help single individuals ensure that wishes regarding their assets are carried out.