Elaine Malek, 52, president of a human-resources and educational consulting firm in Milwaukee, Wis., has a lot of friends and relatives. But since she has no husband or children--and thus no immediate heirs--she has had to take special pains to plan her estate. In her will, she carefully divided her assets among her sisters, nieces and nephews, and 10 grandnieces and grandnephews. She left her home to one of her sisters and her prized Latin American art collection to one of her close friends. She even provided for her two dogs--which mean the world to her--setting aside $20,000 for their care and feeding.
"You have to spell out everything in the most precise detail when you don't have kids, since there is no logical line of succession," Malek says. "Although you may not want to think about it, you really must give more thought to your health needs and well-being as you age."
More and more Americans find themselves in Malek's position these days, thanks to the high rate of divorce and the number of women from the baby-boom generation who chose careers over marriage. And, like Malek, many are starting in their 50s, while they're still healthy, to plan for their golden years. Some are buying homes in retirement communities that have plenty of health-care services. Others are fostering networks of younger family members and neighbors willing to help out if they become ill. Many are designating friends or siblings who will eventually dispose of their homes and treasured possessions. Some are even planning their funeral, right down to the number of limousines and the type of food served at the postburial reception.
One of the first things anyone without kids should learn before planning an estate is the difference between a will and a trust, says David Lockwood, partner in the Greenwood Village, Colo., law firm Engel Reiman & Lockwood. So-called revocable trusts have many advantages over traditional wills for people whose most important relationships are likely to change over time. Revocable trusts allow you to place most of your assets--such as bank accounts, stocks and real estate--into a fund you control for the benefit of whomever you designate. You must indicate when you set up the trust who will receive each of those assets, but you can change the terms at any time. (Cost to set up: about $2,500.)
There are tax implications to all this. A trust, unlike a traditional will, is not subject to probate expenses should there be any disputes among beneficiaries. For married couples, any assets left to a surviving spouse are not taxed under current federal law. But if your estate is worth more than $1 million, whatever your spouse leaves to a survivor is then subject to estate tax, which can be as high as 55%, says Sally Merrell, partner with the Milwaukee law firm Quarles & Brady LLP.
Merrell points out that people without children have one big advantage when it comes to estate planning: they get to leave whatever they want to whomever they choose. "If you have two children, you may feel compelled to leave equal amounts of money to each one--even if you are a lot closer with one kid," says Merrell. "But if you have a nephew who is a dear and a niece who isn't, you probably wouldn't be too concerned about leaving more money to that nephew."