If you die without a last will, you forfeit the opportunity to direct what happens to things you own and the people and interests for which you are responsible. The intestacy laws of your state, which are the laws that govern the administration of estates for people who die without a will, take over. This might result in distributions of your assets that are very different from what you like.
How Are Assets Distributed At Death?
Before diving into who inherits if you die without a will, you should first understand how assets pass at death. There are three different types of assets to consider.
Without going into all the details, one might think of operation of law assets as titled assets with built-in transfer mechanisms. These include jointly owned assets with rights of survivorship, in which your co-owner automatically inherits your share, as well as financial accounts with beneficiary designations like a 401(k), an IRA, or a payable-on-death checking account. These assets can transfer from one owner to another without a will because the beneficiary is named on the instrument or the account itself.
Probate assets are non-titled assets or assets for which the beneficiary cannot readily be identified independent of a designation in a last will. We need to read the will and go through the probate process to figure out who gets the assets. If there is no will, these probate assets pass by the default rules under state statute.
Assets passing by statute are not a type of assets in and of themselves, but rather legal “defaults” that do one of two things:
- Override operation of law and probate asset distributions, or
- Act as a substitute in the event that the deceased individual did not create an estate plan and died intestate
This article focuses on what happens when state law acts as a substitute for a will.
Who Inherits if I Die Without A Will?
If you die without a will, your operation of law assets generally pass to the individuals with right of survivorship or the beneficiaries designated on the asset. Any assets normally considered to be operation of law assets for which you forgot to make beneficiary designations –– a Fidelity investment account without a beneficiary designation, for example –– become probate assets.
Your probate assets are the challenge. Since you don’t have a will, we don’t have a legal way of knowing who you want to receive your probate assets. Distribution of your probate assets defaults to what the state thinks is best, which are the provisions outlined in intestacy law.
Imagine your family standing in line waiting to board a plane. Those with the closest lineal relationships to you (e.g., your spouse and children) are in the first boarding group, and more distant relatives are in subsequent boarding groups. The state calls the first boarding group to the gate and tries to distribute all your assets among them according to a formula dictated by state law. If there’s no one in the first boarding group (i.e., you do not have a living spouse or children), the state calls the second boarding group. The process repeats, with the state calling additional boarding groups if for whatever reason it can’t fully distribute the assets among the prior one.
Who falls into which boarding group – the priority your individual relatives have in claiming your assets – as well as the value of assets a given individual may receive, varies by state. Most states have rules that look similar to the Uniform Probate Code, which proposes the following priority distribution:
The key takeaway is that the earliest boarding groups have the highest claim on your assets. So long as there is at least one living member of a boarding group, all your assets go to that group before the next group receives anything.
Why Does Dying Without A Will Matter?
Default inheritance priorities are designed with the best of intentions to imitate the distributions that similarly situated individuals might make.
Many married individuals with children who create last wills or revocable living trusts leave most or all of their assets to their spouse and children, which is the same distribution scheme contemplated by most state’s default inheritance laws.
The default does not work for everyone, however. The default doesn’t know that you had a falling out with one of your children. The default doesn’t know that you cut off ties with your parents and would prefer to give everything to your longtime partner or fiancé – who by the way, is not even in any of the distributions unless you are in a registered domestic partnership and living in certain states.
Benefits that Go Beyond Distribution Arrangements
Even if you are comfortable with your state’s default rules governing asset distribution upon death, you’ll still benefit many other ways from having an estate plan:
- Lowers cost and time of your estate administration
- Gives more to your beneficiaries
- Reduces or eliminate family disputes
- Names guardians for your minor children
- Makes known your wishes for burial, cremation, or other end-of-life services
- Expresses your advance preferences for emergency or end-of-life healthcare
- Appoints someone to make medical decisions for you if unable to make them yourself
- Chooses your own trusted individuals to follow your instructions vs. relying on state-appointed designations
Get Started by Creating Your Last Will Today
Think about what made you read this article. Were you looking to answer the question, “Is making a will worth it?” Or, “do I really need to do this now?”
Regardless of age and whether you’re comfortable relying on your state’s default inheritance rules, you will clearly benefit from having an estate plan.
And in the same time that it took you to read this far, you can complete your perfect last will with Just In Case Estates. So what are you still waiting for?
