Changing social customs, rising singleness, increased opportunities for women as well as declining fertility have seen childlessness rise in many parts of the world. The proportion of married couples in the US having children has more than halved since the 1960s, childlessness increased fourfold in China in the last decade and rapidly across East Asia, and there is rising childlessness in southern Europe. Whether by choice or circumstance, increasing numbers of ageing adults and couples have no children to whom they can bequeath the wealth they’ve spent a lifetime accumulating.
If you’re in this position, you may be questioning the point of estate planning. Without a carefully designed plan, however, much of your wealth could disappear in tax or be left to relatives you don’t have a close connection with. And just because you don’t have children or grandchildren to whom you can leave your estate, you may have other family members, friends or favourite charities you would like to see benefit from your life of hard work.
1. Get a will
The first and most basic step you should take is to draft a last will and testament designating who should receive which parts of your estate. If you die ‘intestate’, or without a will, the decision on how to distribute your assets is likely to be made by the legal courts in your country of residence. The inheritance hierarchy in such cases usually proceeds from the surviving spouse to children and then grandchildren. If you don’t have any of these relatives, your assets may pass to persons you would never have intended to inherit from you. If you have no living heirs, your estate could pass by default to the state.
As fundamental a step as it may seem, many people never get around to creating a will, with statistics from the US, the UK and Switzerland suggesting that more than half of the population fail to create a will and testament.
Yet leaving it to family and friends to sort out your estate without a written record of your preferences puts pressure on them during an already stressful time. By having a valid will in place, you can ensure that your loved ones are spared from having to work with courts to pass on your assets.
2. Appoint an executor
An executor is somebody entrusted by you with the responsibility of carrying out the arrangements and preferences laid out in your will. Their duties could range from filing documents with the court to selling your property, settling your debts or distributing your assets as directed.
Whereas those with children typically choose an adult child to be the executor of their estate, those without children might want to consider another family member or friend. This person should be someone who has the character and capability to comply with your wishes, and who isn’t exposed to any conflicts of interest. If there is no suitable candidate within your family or circle of friends, or if your estate is large and complex, it’s advisable to use the services of a professional executor.
3. Establish a power of attorney
A power of attorney is a legal document giving another person the power to handle your affairs if you become incapacitated and cannot manage these matters on your own. Unlike an executor, who implements your decisions after your death, the person entrusted with the power of attorney takes decisions for you before you are deceased. These might be decisions around property, investments, taxes, debts and medical care.
Even if you’re married, your spouse is not automatically granted power of attorney simply by force of marriage. You need to execute a power of attorney that grants them these powers to act on your behalf. It’s also vital to name one or more back-up persons to take on this role in case your spouse becomes incapacitated or dies and cannot assume the power of attorney.
4. Leave your mark on the world through philanthropy
Even if you don’t have a next generation to support within your family, you can still play an important role in shaping the future by giving to a worthy cause. In fact, those without children are one of the most important sources of funds for charitable organisations generally. One study in the UK found that childless people are five times more likely to leave money to charities than those with children.
It’s important to focus on organisations or causes that match your interests and values. Examples might include establishing a foundation to award scholarships to children or donating to a charity that invests in companies working to address environmental issues. You can gain an extra sense of enjoyment from philanthropic efforts like these by starting to gift the money before the end of your life, so that you can witness the impact it has and the pleasure it gives others. If philanthropy appeals to you, we recommend that you talk to a professional to help you navigate the best path forward in making a difference.
5. Remember to review your decisions regularly
Perhaps the most important rule of thumb when planning your estate, whether you’re childless or not, is to carefully document everything that you want to happen and also to review it periodically. After all, relationships with family members and friends can change over time and this may be reflected in the portion of assets you plan to give to them. You should also update your designated beneficiaries periodically because your assets will only be passed on to them if the named beneficiary actually outlives you.
Nobody know what the future will bring. However, while parents can generally assume that their wealth will be passed on to their children, the possibilities open to childless individuals and couples is less certain. By following the five steps above, you continue to exercise some control over what happens to your hard-earned wealth and bring a source of joy to other family members, friends and worthwhile causes.