Succession Planning For Single Clients

These days, it is crucial to engage your wealthy single clients in proper succession planning/estate planning. A married person will pass all assets to their spouse and children upon their death, while, a single affluent person without a will may find that their assets are disbursed in ways that they do not desire.
High net worth clients that have never married are divorced or separated, or outlived a non-spouse partner need to address who will be handling their financial and health-related decisions, especially as they become older and potentially disabled. These clients also need succession planning that includes estate planning documents that clearly spell out who will receive their assets, such as charities, etc., upon death. These high net worth clients should work with an estate planning advisor in tandem with their attorneys to ensure that their will, trust documents, and beneficiary designations are all coordinated to carry out these wishes. It is a fiduciary requirement for their wealth planning and legal team to make sure that these clients understand the many tools available to them—this, along with choosing the appropriate family members, friends, or other representatives that will carry out their wishes are critical components of the estate planning process for single clients.
Understanding the basics
For your clients who aren’t married, the taxes on their estate will be dependent on whether they’ve never married, or they’ve divorced. Single clients’ estates will not incur federal taxes until the property exceeds the individual estate tax threshold value that applies to them.
A widowed client must be made aware of the federal exclusion amount– including the individual estate tax threshold, and may also include the unused portion of the deceased spouse’s estate tax exemption. This scenario, known as ‘portability,’ only applies when your client’s executor chooses to add the deceased spouse’s exemption to their own on the spouse’s estate tax returns– they can accomplish this by filing IRS Form 706 within the nine months following the spouse’s date of death. You can extend this filing deadline for six months by filing IRS Form 4768 by the nine-month deadline.
Durable Powers of Attorney
It is especially critical for unmarried clients to have a power of attorney in their succession planning efforts. The ‘durable powers of attorney’ document allow these clients to designate someone (often called an attorney-in-fact or agent) to manage day-to-day financial or personal affairs. If the PoA contains language that describes it as a ‘durable’ document, it becomes a durable power of attorney. This means that the document will remain in effect even if the client becomes incapacitated or disabled and is a permanent directive that authorizes a designated representative to handle the client’s affairs if they are unable to do so.
It’s critical that the client chooses a competent attorney-in-fact that they trust, as the individual has permission to act within the authority given to them in the power of attorney…and the acts of the attorney-in-fact are binding on your client. Consider this scenario: your client is incapacitated, and their attorney-in-fact liquidates assets to pay for the client’s care. As long as they act within the authority given to them under the power of attorney, the attorney-in-fact is fully authorized to do so.
Health cares directives and living wills
The healthcare directive (Also known as a living will) provides general instructions to your client’s doctor as to how to handle healthcare related decisions if your client becomes incapacitated. Clients can verbalize specific wishes regarding certain medical procedures—preferences regarding certain life-sustaining procedures or systems if the client falls terminally ill or severely injured in such documents, so they may find it beneficiary to declare these wishes in a living will.
The medical power of attorney allows clients to name an attorney-in-fact (occasionally referred to a healthcare proxy). This individual is authorized to discuss your client’s treatment with medical care providers and to make healthcare decisions that are representative with the client’s wishes. Those designated by your clientele as their representative to make medical decisions is not necessarily the same person that they choose to be their representative in a durable power of attorney to act for them in making financial or business decisions. Some states offer the opportunity to combine the healthcare directive and the client’s medical power of attorney to be combined into one document.