How singles and child-free couples can plan for aging and incapacity

When it comes to care in old age or in the event of incapacity, it's often assumed that children will step in. For those without children, otherwise known as Dual Income, No Kids (DINKs) or Single Income, No Kids (SINKs), crafting their estate plan with explicit instructions is paramount.

The two biggest considerations for DINKs and SINKs are who will receive their assets when they die and who will care for them if they become incapacitated by illness, injury or natural aging. "When you have children, in theory, you know who would step in and care for you if you have a medical crisis or become disabled. For those without children, they have to plan for alternatives,” said Karla Salinas, a financial planner at BOK Financial®.

Three key legal documents

This planning involves having the necessary documentation in place—before you need them. "There are three key legal documents you need to ensure someone has the ability to step in on your behalf if you are unable to make decisions for yourself,” said Jessica Hendrix, private wealth market manager at BOK Financial. These include: 1) a medical durable power of attorney (MDPOA), 2) an advance healthcare directive (otherwise known as a living will) and 3) a financial power of attorney (FPOA).

“The MDPOA and living will are documents in which you name a person or entity you trust to make medical—and, in the case of the living will, potentially end-of-life decisions for you," she explained. “The FPOA appoints an agent to handle your finances, such as living expenses, investments and your care payments.”

Both the medical and financial powers of attorney can be durable, meaning they go into effect and continue beyond incapacitation or can be drafted so that they only go into effect in the event of incapacitation.

Determining whom to appoint

While married or partnered people can initially turn to their spouse or partner for these roles, singles need to consider another trusted family member or friend who is able and willing to step in, knowing that the job may require considerable time and effort. "You also need to consider the age and ability of the person you wish to appoint. If they're the same age as you or older, keep in mind they will age as well, and may not be up for the task when you need them," cautioned Hendrix.

However, what if you don't have anyone to name? "That's where a corporate trustee comes in," said Hendrix. " Corporate trustees work in the facets of personal finance every day, giving them the experience, expertise and fiduciary responsibility to manage others’ wealth efficiently and responsibly. However, like most corporate trustees, when it comes to medical decision making, we prefer that the professional healthcare fiduciaries—whom we’ve come to know well and work with closely—fill that role for our clients."

Keep in mind that these services come with fees and, if you appoint a family member or friend in a legal role, “it's also customary to state they are entitled to reasonable financial compensation for their time spent handling your affairs in your governing planning documents," said Hendrix. Professional trustees, meanwhile, typically charge 0.5% to 1.5% annually on the assets they manage. Hired healthcare fiduciaries typically charge hourly rates that can be hundreds of dollars per hour.

In any event, Hendrix stressed the importance of appointing someone yourself rather than leaving these decisions up to the court or state law to do it for you. "Having these documents in place prevents the need for a court-appointed guardian or conservator should you become incapacitated. These legal proceedings are usually cost prohibitive and can reduce your assets over time. Failing to name your own trusted decision makers can result in someone you are unfamiliar with being appointed on your behalf, which is a backup plan, but probably not one that anybody wants."

Whom will you leave your assets to?

Since DINKs and SINKs don't have children to leave assets to, you may want to consider other family members, friends, organizations or charities. While the first to pass of the DINKs couple will likely leave their assets to their spouse, it's the surviving spouse who must decide where those assets go.

Hendrix cautioned that careful estate planning is critical to ensure that the distribution of assets follows your wishes after you pass. "If you have a trust, you can direct how assets belonging to the trust are managed and distributed. And for some assets such as bank accounts, you can name specific beneficiaries who will ultimately receive those account funds directly rather than through probate. Your beneficiary designations need to be reviewed and updated as needed. Depending on your age and station, we typically recommend you review these documents with your attorney or trusted advisor every five years, or in conjunction with a big life change, to ensure your plan still aligns with your goals."

Be careful not to overspend

Finally, it’s important not to purposely “spend down” your assets, experts cautioned. Salinas said she's had several clients who've built up wealth, don't have children and tell her they want to spend their money because they don't have anyone to leave it to—but she cautions against this approach.

"I'm constantly thinking of the risks inherent in it. If you're 50 years old and start spending down your assets, it's my job to help you think about what to do if you have a major healthcare event when you're 70 and have already spent a lot of your wealth. You have to be careful you don't spend too much too early," she explained.

A financial planner can help you take a more mindful approach to spending because they can run scenarios through planning tools. "The software will help guide those conversations because, when you're not just speaking in hypothetical terms, you really see the numbers,” she explained. “If a couple thinks they have plenty of money and spends a lot, they may have a false sense of security, but we can see what that will look like 10 or 15 years down the road. People think they won't live to their 90s, but it's happening more often now, and you need money to cover those years."

Moreover, even in retirement, it's important to keep an emergency fund. While it may no longer be earmarked for job loss, other emergencies can still arise, Salinas cautioned. "What if you have to replace your HVAC unit or need major dental work? You don't want to have to liquidate an investment account in a down market."

And so, while it may seem like financial and estate planning is less crucial if you don’t have kids, that misconception can cost you—and your legacy.