When Adam Cooperman opened a technology consulting firm
in New York City eight years ago at age 33, he also prepared a will and other
legal and medical documents. “If I have all these professional matters, I
should probably have my personal affairs in order, as well,” he explained. With
no spouse or children, he divided his assets equally between his parents and
his brother. Partly because those relatives were 3,000 miles away in
California, he gave powers such as his health care proxy, or the right to make
medical decisions if he is incapable, to “people that I valued as mentors,
advisers and friends” who lived nearby. Today Mr. Cooperman, still single and
childless, has sold his business and is rethinking his estate plan. He might
hand the nonfinancial powers, along with his assets, now in the low seven
figures, to his relatives.
For married couples and parents, such estate decisions
are usually routine: The surviving partner and offspring get the money and the
legal and medical authority. However, more and more Americans are in a position
similar to that of Mr. Cooperman. According to the Pew Research Center, 20
percent of adults age 25 and older in 2012 had never married, up from 9 percent
in 1960. The number of women age 40 to 44 who also have not borne children has
seesawed, from 10 percent in 1976 to 20 percent in 2005 to 15 percent in 2014. When
people do not specify their intentions, most state laws follow fairly rigid
genealogical rules of inheritance and chew up time and money in the process.
Estate-planning experts say the first choices as heirs
are usually a longtime companion, nieces and nephews, and siblings, followed by
parents, other relatives, then friends. After that list, women and older
clients are particularly likely to add charities, planners say. Experts also
advise wealthy clients to consider charitable bequests to reduce estate taxes.
Most popular are the donor’s alma mater and medical causes that affected the
donor’s life, although planners have seen beneficiaries like animal shelters
and scholarships for firefighters.
When she wrote her will four years ago, Mary Reilly, now
52 and the owner of the MBA Nanny, a backup babysitting service in New York,
divided her approximately $400,000 in assets equally between her two sisters.
She omitted her longtime boyfriend, noting that “his net worth was fairly
substantial.” That decision became moot when the couple later split up. And as
she contemplates updating her documents, Ms. Reilly said she might reduce one
sister’s share to around 30 percent, because “she’s married, and her husband
has done pretty well.” She might also carve out a combined 5 to 10 percent for
her three nephews, now that all are over age 18.
Experts disagree on whether financial beneficiaries
should also have legal and medical authority, as Mr. Cooperman is considering
doing. Stephanie J. Lee, founder of East Rock Financial Services, a financial
advisory firm in San Francisco, warned that heirs might have difficulty coping
with estate work “at a time when they’re grieving.”
Lawyers, accountants and bank trust officers can handle
legal and financial tasks, but for sensitive medical decisions, experts suggest
relatives or close friends who are geographically nearby and have enough time. Ms.
Reilly gave her then-boyfriend, rather than her sisters, her health care proxy,
because “he understood more clearly that I would not want to stay alive
forever.”
In any case, people should review these decisions every
five or so years, according to estate-planning experts. For now, Andrea
Reichenbach, 39, a New York marketer, named her parents and brother as the
beneficiaries of assets she calls “modest by New York standards” and gave her
brother her health care proxy.
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