Making an estate plan is a task that you should not put off. Failing to put in place an estate plan can cause serious issues for your family and loved ones in the future. This can result in your assets being distributed after your death in a manner that you would not have wanted. Those who die without a will or any type of estate plan will be subject to intestate succession laws which will determine who will receive what assets from your estate.
How does intestate succession work?
Intestate succession is the procedure that is legally required to determine how to distribute your estate’s assets in the case of you passing away without a will or other legal estate planning instrument in place. The probate court will be in charge of interpreting the relevant state laws and applying it to your estate in order to provide direction as to how your estate should be legally distributed and managed in this case.
General order of succession
Distribution of an estate based on intestate rules is different and will vary from state to state, however the general order of succession is usually the same with some small variations. Usually, your spouse will be the first person in line to inherit assets of your estate in the case of intestate rules. However, if you do not have a spouse available to receive your estate’s assets, the beneficiaries next in line would be your children. Without children, your parents will be next in line and then your siblings and then your grandparents and then your next of kin. If you have no next of kin your estate will likely be distributed to the state government.
Blended families and special circumstances
Those who have blended families or other special family dynamics could end up with a more complicated situation in terms of determining the proper intestate order of succession. Usually, natural born children and adopted children will have the same rights in intestate succession. On the other hand, stepchildren usually do not have intestate succession rights to your assets.
Assets exempt from intestate laws
There are some types of assets which are not subject to intestate succession laws even if you pass away without a will. Many people will put assets in a trust which allows those assets to bypass the probate process despite not having a will. Basically, in this type of estate plan, the trust takes the place of the will as the central legal document.
Certain types of financial and investment accounts have payable upon death terms which names a specific beneficiary which means they are not subject to intestate succession laws. This may be true of insurance policies as well which name specific beneficiaries.
Best to avoid intestate laws
Usually, it is best to do what you can to avoid having your estate assets becoming subject to intestate laws. By having an estate plan in place, including a will, you can have full control over which assets of your estate go to which heir. However, you never know when it will be your time to go, so do not delay. Talk to a wealth management professional to start your estate planning now.
While we are familiar with the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.