Dying Without a Will

I swear, as soon as we get into port, I'll see about getting that will made. - Anonymous passenger aboard the Titanic.

In life, making no choice is actually making a choice. The same applies in death.

If a person dies without a will or a will turns out to be invalid, two things can happen. The first and more preferable scenario is that all of a deceased's assets are transferred in an orderly fashion by those closest to the deceased. Common ways that this may happen automatically are when assets have a right of survivorship feature (e.g., checking accounts and jointly owned real estate) or when the assets name beneficiaries (e.g., retirement plans and life insurance policies).

Less formally, the distribution of assets occurs when relatives decide who gets what and throw out the rest. This informal distribution might work for smaller and less valuable items, such as household furnishings or the decedent's personal belongings, although disputes can arise even there. However, it is not going to be effective to transfer title to large items, such as real estate, bank accounts or automobiles. For these assets, another distribution method will kick in.

The second way assets get distributed when a person dies without a will (intestate) is according to the default rules of the state where the deceased resided. These rules are generically referred to as intestate succession laws, statutes of descent, or rules of descent and distribution. Whatever their name, though, they can be a huge disappointment for those caught unawares, particularly in a non-traditional family, such as second marriages where there might be step-children or half-children and for unmarried couples.

Tip Deciding not to have a will is effectively the same as letting your state of residence decide for you who gets your assets after your death. Rather than leave this important issue unanswered or in dispute, each state has a default system (commonly referred to as intestate succession rules or statutes of descent) in the event one is needed. For some decedents, the net result may be the same as he or she would have wanted, anyway. Most, though, may be surprised how a state decides who gets what. More importantly, a will should do more than just divvy up assets: that's actually the trivial aspect of estate planning. A will allows you to provide for minor or disabled children (both financially or personally.) A will enables the testator to set up trusts to ensure that the assets are squandered by the survivors, even if they are adults when they inherit. It can enable planning that makes the "second succession" (the one following the death of the surviving spouse) more effective. This includes "simultaneous death" planning provisions. A will can also implement transfers in a way that reduce or eliminate estate and inheritance taxes.

State governments are in the business of imposing order to the operation of society, and intestate succession laws are just a part of this process. Intestate succession laws usually come into play when relatives have to go through probate to claim ownership of assets (e.g., money in a bank account that is in the deceased's name only) or when relatives fight over assets that they didn't get. A state doesn't want unused assets just wasting away or fights to break out over who gets what. Instead, who gets what is spelled out and followed precisely. In addition, each state has a vested interest in the process because each state can claim any unclaimed assets.

The good thing about intestate succession laws is that they are intended to mirror the expected wishes of the deceased. For example, a surviving spouse is usually first in line to inherit, followed by close relatives like children, parents, and siblings.

The bad thing about dying intestate (other than dying, of course) is that a state's default rules may not go far enough to meet a deceased's distribution wishes. For example, although a surviving spouse is generally first in line to inherit, the spouse may end up having to share the estate with other relatives of the deceased. Also, if a person is not on the list of potential heirs, then he or she is out of luck (which may result in excluding a "life partner," lifelong friend, or favorite charity). The final indignity is that, if there are no relatives identified during probate, the state takes the assets the deceased spent a lifetime acquiring.

Each state has its own set of intestate succession laws. Although there are many similarities, there are also many potential variations.

Example Most state intestacy laws divide your estate's assets between your surviving spouse and your children. However, a few give the entire estate to surviving spouse. And, in more than one-half of the states, if you and your spouse didn't have children, you parents will inherit a portion of your estate. If there is no surviving spouse, but there are surviving descendents (children and grandchildren) then the estate's assets pass to them. However, how the assets get divided up between the children follow one of three schemes: "per stirpes," "per stripes with representation" or "per capita." If the estate ends up being divided between your great-grandchild, the amount each grandchild inherits will be very different under each scheme depending upon how many siblings he or she had and the scheme used to divide the estate.