Nearly half of American adults are now single, and more people than ever are choosing not to have children, yet almost all financial planning still assumes they will do both.
Tax breaks, retirement accounts and even estate plans are usually designed with families in mind.
What singles shouldn’t worry about
A significant source of financial stress I observe in single clients stems from the expectations placed upon them by others: to do more, give more or pay more.
For example, family members might say that their single siblings have more time or space, so they should be the primary caregiver for mom or dad. Single family members might also be asked to “split” the cost of dinners or family trips because it is somehow considered fair, or that they should foot the bill for tuition or a wedding because they have more disposable income.
Not to be harsh, but we all make choices in life, and you should not have to do or give more to those around you unless you want to.
Therefore, when working with a single client, planning is not about securing a stable home for raising children or life insurance to ensure their heirs are taken care of.
Instead, planning is laser-focused on providing future income streams for retirement, travel, interests and long-term care. We want to ensure that single clients have the funds to live the life they want until it is their time to go, rather than how much is left in their estate.
Charitable gift planning
Once we are not as concerned about leaving assets to heirs, an entirely new set of possibilities opens up. One of my favorite planning tools is charitable gift planning. It works beautifully for single clients because it allows them to benefit financially during their lifetime while leaving their assets to causes they love.
In most cases, the client receives both a significant tax deduction and a dependable income, and the charity receives the remaining value of the asset after the client passes away.
Here is how it works.
You donate cash or assets, such as real estate or appreciated stock, to a qualified charity. In return, you receive an immediate tax deduction, and, unlike a one-time gift, the charity also agrees to pay you income, often a fixed amount, for life. You can use those payments however you wish: to supplement your retirement, cover living expenses or take some extra trips.
If you don’t need the income right away, you can defer the payments until later, such as when you retire, and your future payout will be higher. In short, it’s a way to support a cause you care about without giving up your own financial security. You benefit now, you benefit later, and so does the organization you love.
Over the years, I have settled many estates for single individuals who left generous charitable bequests. I often think about how different their retirement years might have been if they had been aware of this type of planning.
Charitable gift annuities
“This is a good time to consider a charitable gift annuity,” says Tony Truong, president of the Southern California Council of Charitable Gift Planners and senior vice president of Strategic Philanthropy at the Hoag Hospital Foundation. “Rates are at their highest in 16 years, and payouts are fixed, protecting you from market uncertainty. It’s a great way to build security into your retirement while supporting a meaningful cause in the community.”
He shared the example of a 60-year-old donor who contributes $100,000 to establish a charitable gift annuity. She receives an immediate charitable income-tax deduction of approximately $30,000, and if she begins receiving income immediately, the payout rate is 5.2%, providing $5,200 per year for life.
If she instead defers payments until age 70, the payout rate rises to 9.9% — an increase of more than 90 percent — and the annual income nearly doubles to $9,900. The charitable deduction also increases to roughly $42,000, and she still receives that deduction now, in the year the annuity is created.
With her donation, she can choose which program she wants to support at the hospital, whether it is the Hoag Family Cancer Institute, women’s health, addiction care or broader community health initiatives.
If you are wondering how rates are set, the American Council on Gift Annuities, a nonprofit organization, publishes uniform suggested rates used by most charities in the U.S. Rates are based on actuarial data — life expectancy tables, projected investment returns and a built-in safety to ensure that enough remains for the charity after the donor’s lifetime.
Chances are, there are causes all around you that you’d like to make an impact on or leave a legacy with. For me, it would be our campus church, scholarships for students, our senior water aerobics center, and local gardens. Who would you want to support? The minimum gift for establishing a charitable gift annuity can be as low as $5,000, depending on the charity.
The charitable gift annuity we’ve described is one of the simplest vehicles in charitable gift planning, which also includes more advanced options, such as various charitable trusts.
For more information, please speak with the fundraising or gift-planning staff at your college, community foundation or favorite charity. Before establishing any plan, please consult with your tax attorney or CPA to ensure it aligns with your individual goals and tax situation.
Freedom of choice
We should remember that Jane Goodall, who recently died, lived more than 45 years as a widow, devoting herself to her work, her friends and the planet she loved.
“My life was complete. I didn’t need a husband,” she once said. “She is a reminder that a meaningful life doesn’t have to follow anyone else’s script and that independence can be a colossal force for good.
“What you do makes a difference, and you have to decide what kind of difference you want to make,” Goodall also said.
How you give your time, energy, and money is entirely up to you. The freedom to choose is a gift in itself.
Michelle C. Herting is a CPA, accredited in business valuations, and an accredited estate planner specializing in succession planning and estate, gift, and trust taxes.