Young, single and in need of an estate plan -- Page 2

Worse, if you are a single parent of a minor, the probate court will likely turn your child over to your ex-spouse, the surviving biological parent, and may even appoint him or her to manage the inheritance.

Wills, triggers and trusts
A will is the most common way to make your intentions known, but it is by no means the only way. In fact, singles may not need a will at all if they are willing to put a few triggers onto their major assets.

"In some instances, people may not even need a will because state law would handle anything, any cleanup matters that may come to bear, and there are a lot of things that people can do that a will wouldn't control anyway," says Krull. "In very simple situations, we will use beneficiary designations on the insurance and retirement money, and transfer-on-death or pay-on-death designations on brokerage accounts, CDs, checking accounts. There are a lot of things that you can do to avoid probate in very simple, straightforward situations that don't even involve a will."

In fact, it is possible to rely on a will too much. For instance, the U.S. Supreme Court has ruled that administrators of retirement plans need not look beyond the last beneficiary stated on an account for payout. If you divorced but did not remove your ex as beneficiary on your 401(k), your former spouse could end up with your retirement payout, even if your will says otherwise.

When preparing a will, Hayden recommends referencing an addendum in the will where you list who will get your various assets and personal property (and be sure to include your pets). That way, should you make changes, you won't incur a legal fee to do so.

Giving your estate away
Singles often intend to leave part or all of their estate to charity, and just as often fail to do so effectively. Krull recommends three methods for effective (and tax-effective) giving. Added bonus: These techniques are not a matter of public record, so your financial planning remains personal.

• Annual gift exclusion: One of the best ways to lighten your estate and thus reduce estate taxes is via the annual exclusion, which allows you to give $11,000 per year to as many people as you like without triggering a taxable event.
• Charitable remainder trust: This trust is especially effective in instances where you have income-producing property. By creating a charitable remainder trust, you get the income from the property for life and tax deductions for the value of the charitable gift; the charity gets the property that remains at your death, hence the name. Charitable remainder trusts can be revalued on an annual basis (a charitable remainder unitrust) or you may set up a charitable remainder annuity trust, where you select a fixed annual payout amount.
• Donor-advised fund: Not yet sure which charities should receive your legacy? Want the flexibility to support new organizations, even after you're gone? Maybe a donor-advised fund is the answer. It creates a form of endowment fund that provides an income stream for the charities designated by you or a committee of family members or friends whom you entrust with your vision. Most cities have a community foundation that administers donor-advised funds for a small fee.

Money coach Hayden says men and women differ in their approaches to charitable contributions.

"The problem with men is they don't think they have enough money yet. The challenge for women is they don't focus their attention; they give money the way they spend money, in small amounts that are invisible," says Hayden. "You don't have to have a pile of money to make an impact. You can't wait until you're rich to have an impact."

Jay MacDonald is a contributing editor based in Mississippi.