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May 20, 2022

Solo Aging: What Does This Mean for Your Estate Plan?

Living alone is a preference for many people who enjoy their solitude and seeing friends and family on their own terms. For others, living alone is a circumstance they find themselves in but may not have chosen. Approximately 36 million people live alone in the U.S. according to the 2020 Census, which is about 28% of American households.

Among U.S. adults aged 60 and older, about 27% live alone, a far higher percentage than the 16% average in 130 countries studied by Pew Research. For many of them, their goal is to age in place independently. Establishing a financial support team can make doing so easier.

“For older adults, safety issues are an important consideration," said Joseph Goldman, a trust advisor with City National Bank. “Another important consideration is what happens if someone is incapacitated? For married couples, a spouse is often the obvious person to take care of someone. However, the caretaker is not quite as obvious when someone is living alone."

While estate planning is essential for everyone, the lack of planning could have even more negative consequences for someone aging on their own.

“There tend to be more inefficiencies and delays if the solo ager has multiple heirs without any clear division of responsibilities," said Goldman. “Establishing an estate plan provides guidance that allows for a smooth process and helps prevent fighting and resentment among loved ones."

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Estate Planning Basics for Those Living Alone

Consulting with an estate planner and a wealth advisor can be the simplest way to prepare the documents everyone should have to protect themselves and their heirs as they age.

Four basic documents to create if you are living alone include:

  • A revocable living trust that clarifies what will happen to your assets if you become incapacitated and after you pass away.
  • A pour-over will that clarifies what will happen to your non-trust assets (if any) after you pass away.
  • A durable power of attorney that gives legal authority to a designated person to make decisions on your behalf if you become unable to do so on your own.
  • An advanced health care directive that includes information about your end-of-life wishes and designates who can make medical decisions on your behalf if you become unable to do so on your own.

“In many states, including California, the basic package of estate planning documents includes a living trust, in large part to avoid the complications of probate. However, a trust might not be necessary in all states," said Goldman. “We walk our clients through the documents, make sure everything is up to date and that the documents accomplish the clients' goals. Then the paperwork is drafted by an attorney who does estate law as the bulk of his or her practice."

“The durable power of attorney and advanced health care directive offer protection if you become incapacitated and can't make financial or medical decisions on your own," said Goldman.

How to Choose Trustees

Whether they are aging solo or not, every person needs to make similar choices about who they will designate to make decisions on their behalf and who will manage their estate for their beneficiaries.

“It's important to think carefully about whether you want a family member, a friend, or a professional trustee to manage your affairs," said Goldman. “You can also have co-trustees, such as a family member and a professional trustee who can work together on your behalf."

According to Goldman, a professional corporate trustee has several benefits, particularly for people who are aging alone.

“A corporate trustee means you will always have someone available to you instead of choosing someone who may not be local, may not have time or may no longer be alive when you need their help," said Goldman.

Professionals also offer the benefit of expertise.

“Corporate trustees do this work every day, so they know how to quickly get things done as opposed to someone without experience who might not know how to navigate the medical or legal system as necessary," said Goldman.

Another advantage of professional trustees is their objectivity.

“A family member or close friend is likely to be grieving or emotionally distraught when they must make decisions," said Goldman. “There can also be infighting or resentment between people who are close to you. That can be even more intense for solo agers if there's no natural support person such as a spouse or child."

Solo agers often want to choose a friend or perhaps a younger relative such as a niece or nephew, said Goldman.

“A friend or contemporary may not be around or available when needed, and a younger person may be too busy with their own career and family," said Goldman. “A corporate trustee can reliably follow the directives in your estate planning documents. You can always have that friend or relative serve as a co-trustee to make sure you have someone with personal insight offer input."

How to Protect Solo Agers from Financial Scams

While no one wants to think about the possibility of becoming the victim of a scam or experiencing dementia, older people who live alone can be even more vulnerable to the damage caused by those issues.

“It's important to address in your legal documents the potential need for a guardian or assistance in the event of cognitive decline," said Goldman. “Your document needs to make it clear how your lack of capacity to make decisions is defined. For example, you can include a provision that requires two doctors or your trustee and a doctor to affirm that you cannot make medical and financial decisions on your own. The documents identify who will make these decisions on your behalf."

A professional advisor can also add a layer of protection against fraud, said Goldman.

“You can write into your living trust that a financial advisor or a co-trustee needs to sign off on any major financial moves or decisions," said Goldman.

A team of wealth advisors and estate planners can help solo agers work through some issues that can be complex for people who live alone.

“Many people without kids struggle to decide who to designate as their beneficiaries," said Goldman. “One role of our wealth planners is to talk through your options and help you decide if there are charities you want to support or friends and other family members who you want to provide for."

Wealth planners can also map out a financial plan to project potential future needs such as daily assistance or even a move to a supportive community.

“The important thing for people who live alone is to reach out to their team of advisors to put a plan in place to address possible issues as they age," said Goldman. “Their estate plan documents go a long way to provide the support they need."

This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.

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