Do You Need a Will or Trusts or Both?

October 5, 2023

A comprehensive estate plan is the best way to protect yourself during your lifetime and your family after you’ve passed. For many people, it’s tempting to think a simple will is all they need, as reported in a recent article, “Is a Will Really the Best Way to Pass an Inheritance to Your Family?” from The Motley Fool. This might be true if your estate is relatively small. However, there are good reasons to consider using a trust or other estate planning strategies. Do you need a will or trusts or both?

A last will and testament is a binding document to allocate assets after death, assign guardianship for minor children, name an executor to manage your estate and convey other last wishes.

However, there are other considerations to an estate plan, including taxes, special needs of heirs and how quickly you want assets and property to be transferred. Your estate planning attorney can discuss how best to accomplish your goals once they are articulated.

One of the challenges of having only a will is probate. This court process authenticates a will and gives the named executor the power to manage the estate and eventually distribute assets. Probate can be a long, costly and public process when assets are unavailable to heirs.

In some jurisdictions, probate is a matter of months. In others, it can be years before probate is completed if the estate is complicated.

Most people don’t know this, but wills in probate become part of the public record. Anyone can see everything in your will, including who you leave property to and how much they receive.

An alternative is the living trust. This document establishes a legal entity to hold assets during your lifetime. The trustee can be yourself and a secondary trustee. The trustee administers the trust according to your wishes, which are established in the language of the trust.

Depending upon your state, your estate planning attorney can put a provision moving assets into the trust after your death, in case any asset is accidentally forgotten and not moved into the trust.

Living trusts are also revocable, meaning they can be amended or revoked at any point during your lifetime. This provides a great deal of flexibility.

Joint ownership is another option used mainly by married spouses. Joint Tenancy with Right of Survivorship (JTWRS) is a popular way to own property. Assets owned jointly transfer directly to the surviving spouse (or joint owner) without the need for probate.

So, do you need a will or trusts or both? Just as everyone’s life is different, everyone’s estate plan is different. State law varies, and the size and complexity of your estate will influence how your estate plan is structured. Your best bet might be a mixture of wills, trusts and joint ownership arrangements. An experienced estate planning attorney can create a comprehensive estate plan to suit your and your family’s needs. If you would like to learn more about wills and trusts. please visit our previous posts.

Reference: The Motley Fool (September 4, 2023) “Is a Will Really the Best Way to Pass an Inheritance to Your Family?”

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Add your Pet to your Estate Plan

October 4, 2023

Pets are like family. In fact, some are even cared for better than family. You want to do what you can to ensure our pet is happy and healthy after you are gone. There are a few ways you can add your pet to your estate plan. The first rule is that you can’t leave money to your pet. Unfortunately, the law says that animals are property, and one piece of property can’t own another. Yahoo’s recent article, “3 Ways to Ensure Your Pet Is Cared For After You Die,” explains that a pet trust is a trust that provides money and care for your pets when you can no longer do so. People usually create a pet trust as part of their estate planning. However, in some cases, it can be helpful if you’re incapacitated or unable to care for your pet.

Like all trusts, a pet trust is a legal entity that owns property, money and other assets. You fund the trust by contributing assets to it during your lifetime and leaving assets to the trust in your will. Your pet is the beneficiary of this trust. Once the trust is activated, a trustee will use its funds to pay for your pet’s food, housing and other care. In most cases, this means someone has taken possession of your pet, and the trust reimburses their costs.

If you want to ensure that your pet is well cared for after you die, most experienced estate planning attorneys consider a pet trust better than a will. Pet trusts are more specific than leaving your pet and some money to an heir. A trustee must be sure this money really is spent on your pet’s well-being. They can also find a new home for your pet, if your heir changes their mind and chooses not to inherit the animal.

A pet trust does two main things. First, it provides the resources to care for your pets and other animals once you no longer can. Second, it provides the instructions to make sure those pets are cared for the right way.

Funding a pet trust can be an issue for some, and if you leave too little money in the trust, it will run out during your pet’s lifetime. If that happens, the trust will wind up, and state law will govern what happens to your pet. If you leave too much money, your family may challenge the trust. While that’s pretty rare, courts will reduce excessive funds left to a pet trust.

Don’t just assume that someone will assume the role of trustee. And don’t assume that someone will want to take possession of your pet. Ask the people you intend to name for those positions. If someone you trust wants to take your pet after you die, you can name them as both caretaker and trustee. Otherwise, you may want to name a professional trustee, such as a lawyer or banker, to oversee the trust. If you do name a professional trustee, make sure to contribute enough money to cover their costs, as they will bill the trust for their time.

If your pet has any specific needs, detail these in the trust. However, be careful not to get too specific, or people may disregard your instructions, creating issues. Speak with your estate planning attorney about the best ways for you to add your pet to your estate plan. If you would like to read more about pet planning, please visit our previous posts.

Reference: Yahoo (Aug. 21, 2022) “3 Ways to Ensure Your Pet Is Cared For After You Die”

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Ways to use a No-Contest Clause in your Planning

September 25, 2023

There are different ways to defend a last will and testament from a claim filed by an individual or a group of individuals who want to alter the terms you put into your will. One way is to hope your executor or, if the issue concerns a trust, your trustee, can effectively defend your choices, says a recent article from Kiplinger, “What Do No-Contest Clauses Have to Do With Undue Influence?” Another is to include a no-contest clause, which would disinherit all heirs if they lose their challenge or for even filing a challenge in the first place. There are ways to use a no-contest clause in your planning.

A no-contest clause can be a strong deterrent for a beneficiary who believes they are entitled to more than the amount provided if they know that just by filing a challenge, they’ll forfeit their share. However, it may not be powerful enough for someone completely omitted from the estate plan altogether. Many estate planning attorneys recommend leaving something for even a disliked heir to give them a reason not to challenge the will.

There are more reasons than disgruntled heirs to have a no-contest clause in your will. A no-contest clause can help if your will omits any heirs at law not specifically mentioned in the document or revoke the share provided for anyone seeking to claim a share in your estate, increase their share, or claim certain assets in your estate.

A no-contest clause is also useful if an heir is trying to invalidate your will, or any provision in it or to take part of your estate in a way not specifically described in your last will and testament.

Many no-contest clauses treat a challenger as having predeceased you or having predeceased you leaving no heirs, thereby passing their share according to other terms in the document. In certain states, it is very important to include a specific direction as to what should happen to these forfeited shares. Your estate planning attorney will know how your state’s laws work and how best to include this language in your will.

However, what if the person challenging the will has a good reason to do so? For instance, numerous cases have been brought to court because probable cause existed where the decedent was subjected to undue influence and even elder abuse by a caregiver or a relative in charge of their finances.

In many cases, family members only learn of the abuse after discovering the depletion of the estate and the admission of a new last will to favor the elder abuser over the decedent’s family. The no-contest clause could cause a complete disinheritance for a family member seeking to protect the estate and any other heir who appears in court to support the petition.

Not all states treat the no-contest clause the same. Some refuse to enforce them as a matter of public policy. Others strictly construe the clause because they disfavor any forfeitures. Your estate plan should be created with a no-contest clause aligning with the laws of your state. Your estate planning attorney will explain the ways to use a no-contest clause in your planning, and create a will designed to avoid punishing a challenge brought in good faith. If you would like to learn more about no-contest clauses, please visit our previous posts.

Reference: Kiplinger (Sep. 1, 2023) “What Do No-Contest Clauses Have to Do With Undue Influence?”

The Safe way to Pass on Family Heirlooms

August 30, 2023

Family feuds are more likely over Aunt Josephine’s jewelry than the family home. Putting sticky notes on personal items before you die or expecting heirs to figure things out after you’ve passed often leads to ugly and expensive disputes, says a recent article from The Wall Street Journal, “Pass On Your Heirlooms, Not Family Drama. The safe way to pass on family heirlooms is via a trust of will.

Boomers handling parents’ estates and assessing their personal property are having more conversations around inheritance and heirlooms. However, there are better ways to plan and distribute property to avoid family fights over cars, jewelry, furniture and household items.

The person you name to handle your estate, the executor, typically distributes personal property. Therefore, pick that person with care and clarify how much power they will have. An example of this comes from a police officer in Illinois who has been settling his father’s estate for nearly two years. His father owned more than twelve vehicles, a water-well drill rig and two semitrailers of car parts and guns dating back to the Civil War. He also listed 19 heirs, including stepchildren and friends. He told his son he knew he could handle everyone and the stress of people who “aren’t going to be happy.”

If you want a particular item to go to a specific person, make it clear in your will or trust. Describe the item in great detail and include the name of the person who should get it. A sticky note is easily removed, and just telling someone verbally that you want them to have something isn’t legally binding.

Without clear directions, one family with five siblings used a deck of cards and played high card wins for items more than one sibling wanted. Only some families have the temperament for this method.

In one estate, two sisters wanted the same ring. However, there were no directions from their late parents. An estate settlement officer at their bank had a creative solution: a duplicate ring was made, mixed up with materials from the original ring, and each daughter got one ring.

The safe way to pass on family heirlooms is via a trust of will. Ask your estate planning attorney how to address personal heirlooms best. In some states, you can draft a memo listing what you want to give and to whom. It is legally binding, if the memo is incorporated into a will or trust. If not, the personal representative can consider your wishes. Make sure to sign and date any documents you create.

Get heirlooms appraised to decide how to divide items equitably, which to sell and what to donate. If heirs don’t want personal property, they can donate it and use the appraisal to substantiate a tax deduction. Appraisals will also be needed for estate tax and capital gains tax purposes. If you would like to learn more about personal property, please visit our previous posts.

Reference: The Wall Street Journal (July 30, 2023) “Pass On Your Heirlooms, Not Family Drama”

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How an Intentionally Defective Grantor Trust Protects Wealth

August 23, 2023

Most parents want their children to inherit as much wealth as possible, which drives their focus to shield heirs from unnecessary taxes when they inherit. As of this writing, federal gift and estate tax laws are very friendly for building generational wealth, says a recent article from Kiplinger, “One Way to Secure Your Child’s Inheritance in an Uncertain Tax Future.” The article discusses how an Intentionally Defective Grantor Trust protects wealth.

However, this is temporary, as the Tax Cuts and Jobs Act will expire in 2025. When it does, gift and estate tax exemptions will be cut in half. How can you transfer the most wealth possible to heirs? The best tool is often the Intentionally Defective Grantor Trust or IDGT.

The incentive to take advantage of the current tax laws is even greater for those living in one of the 17 states with their own estate or inheritance taxes, especially considering those states’ exemptions are considerably lower than the federal estate taxes.

The IDGT, despite its name, is not at all defective. Removing assets from an estate lowers or eliminates taxation on the estate and heirs. By selling assets from the estate to a grantor trust, they are no longer subject to estate taxes. The trust then pays an installment note over a number of years, which is designated when the trust is created.

So, why is it called Intentionally Defective? The term refers to the fact that the trust is not responsible for paying its own income taxes. Instead, they pass to the grantor or person who created the trust. Consider an estate with $20 million placed in an IDGT. This might generate a $500,000 tax bill, paid by the grantor. This accomplishes two things: The $500,000 paid in taxes is removed from the estate, lowering the estate’s value and the estate tax. Second, the trust is not responsible for paying income taxes on the appreciation of assets so that it can grow faster. Since the trust is not subject to estate taxes, any appreciation of assets inside the trust won’t add to any estate taxes due upon the grantor’s passing.

IDGTs and S Corporations. Many family-owned businesses are S-corporations that shield personal assets from business-related liabilities. If someone successfully sues the business, any judgment will be placed on the business, not the family’s assets. S corp owners hold shares in the corporation, which can be transferred to the IDGT. When family members move their stock into the trust, business ownership is transferred to heirs free of estate tax. If the business grows between the time the trust is established and your death, the growth happens separately from the estate, so there is no estate tax implication to continued business growth.

What’s the downside? The IDGT removes assets from the estate and provides cash flow in installment payments to fund retirement. However, if you die before the installment term ends, the trust pays out the rest of what it owes to your estate, which increases the value of your estate and the estate taxes owed. However, there’s a remedy for this. The IDGT can be set up with a self-canceling installment note or SCIN. The SCIN automatically cancels the trust’s obligation to pay installments upon your death.

Remember that you will be responsible for the trust’s tax liability, so don’t gift so many assets to the trust that you’re scrambling to pay the tax bill.

IDGTs are complex and require the help of an experienced estate planning attorney to ensure that they follow all IRS requirements. He or she will explain how an Intentionally Defective Grantor Trust protects wealth and if it is a useful planning tool for your family situation. If you would like to learn more about Trusts, please visit our previous posts.

Reference: Kiplinger (July 28, 2023) “One Way to Secure Your Child’s Inheritance in an Uncertain Tax Future”

When Life Insurance becomes Taxable

August 22, 2023

A life insurance policy benefit is usually paid to the beneficiary in a lump sum, which isn’t taxable. However, there are situations when life insurance becomes taxable.

A life insurance beneficiary may receive the policy amount in installments. If so, the benefit is placed into an account that can accrue interest. While the beneficiary won’t pay taxes on the benefit itself, they’ll be responsible for paying income taxes on any interest accrued.

Fed Manager’s recent article, “When Is Life Insurance Taxable? Four Scenarios to Consider,” gives the example of Jenny being the beneficiary of a $500,000 death benefit that earns 10% interest for one year before being paid out. She’ll owe income taxes on the $50,000 in interest growth.

The death benefit of a life insurance policy is usually paid directly to the beneficiaries named. If the benefit is included in the estate, it’s subject to potential federal and state estate taxes if it is above the tax exemption amount. About a dozen states have state estate taxes with exemptions, so if the death benefit amount is above these exemptions, any amount above the threshold would be subject to estate taxes.

A life insurance death benefit would be subject to taxes in the event of a taxable gift. This happens when three people serve three different roles in connection to the policy:

The policyholder is the individual who bought the policy and is responsible for payment of the premiums
The insured is the person whose life is covered by the policy and
The beneficiary who receives the death benefit when the insured passes away.

Assume that Tommy buys a life insurance policy for his wife, Tilly. They designate their son Teddy as the beneficiary. If Tilly dies and Teddy receives the death benefit, the IRS considers this a taxable gift from Tommy to Teddy because Tommy was the policyholder. In this situation, Tommy may have to pay gift taxes for any benefit amount that exceeds federal gift tax exemption limits.

The annual gift exclusion is $17,000 per individual. The lifetime limit is $12.92 million per individual. (These “numbers” are for 2023 and are adjusted for inflation.) To avoid this, Tilly could purchase and make payments on a policy herself, with Teddy still named as the beneficiary. Work closely with your estate planning attorney and financial advisors to understand when a life insurance policy becomes taxable and how to avoid the unnecessary financial headache. If you would like to learn more about life insurance and estate planning, please visit our previous posts.

Reference: Fed Manager (April 25, 2023) “When Is Life Insurance Taxable? Four Scenarios to Consider”

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Things that should Never Belong in Your Will

August 8, 2023

Most people don’t enjoy thinking about their mortality. However, creating a will and related estate planning documents makes it much better for loved ones to handle the estate after your passing. Estate planning attorneys know there are certain things that should never belong in your will, says this recent article, “13 Things You Should Never Put In Your Will” from mondaq.

Joint accounts. Accounts owned jointly or with beneficiary designations pass directly to the surviving owner or beneficiary. Putting these items in your will can create confusion and even open the estate to potential litigation.

Personal and private wishes. Don’t use your will to take a stand on family relations or address personal issues from the grave. Settling old scores in a will is a bad idea, as your will becomes a public document, and anyone who wants to can see it.

Business interests for an active business. If your will contains information about a business, it could be easier for the business to function while your estate is being settled. A succession plan and buy-sell agreement are the tools for active businesses, not your will.

Life Insurance. Passing your life insurance policy through a will could lead heirs to lose up to half or a large percentage of estate taxes. Speak with your estate planning attorney about using a life insurance trust instead.

Secure or secret information. Whether personal or business-related, private information will not remain private if it’s in the will. Your will goes through probate and becomes part of the public record, available to prying eyes. Don’t include bank account information, access codes, PIN passwords, keys to crypto, etc.

Significant assets. Even though wills are used to pass assets to heirs after death, this isn’t always the best way to distribute wealth. For instance, if you leave your interest in a business through a will, the court may end up with oversight of their share of the business during probate. Probate also provides a forum for someone to contest their will. Trusts are better tools for leaving assets, since they provide privacy, allow you to dictate highly specific terms and are controlled by a trustee with no court involvement.

Ambiguity. Don’t use vague or general language and expect heirs to figure things out. “I leave my favorite painting to my favorite niece” opens up a world of trouble for the family. The more information you can provide the better. Even if you only have one niece, which is your favorite painting? Similarly, a will directing assets to be left “equally to my two children” won’t work if you’ve welcomed another child into the family.

Assets going through probate when there are other options. Most estate plans are designed to avoid assets going through probate whenever possible. Trusts, beneficiary designations, or gifting while you are living, can simplify distributing assets and avoid probate costs.

Tangible personal property. Jewelry or a valuable art collection should not be bequeathed through a will. These assets may require a professional appraisal, which could delay probate. Instead, assign the property to a trust or leave detailed information outlining how you wish the property to be distributed with the executor.

Funeral and burial instructions. Wills are often read long after funerals have taken place. Your wishes won’t be known or followed. Discuss your preferences with loved ones and document them separately. If you make arrangements in advance with a cemetery and a funeral home, you’ll have the most control over your funeral. Advance planning is a great kindness for your loved ones.

Conditions on gifts and unenforceable conditions. Imposing too many restrictions could complicate your estate and create disputes between beneficiaries. Your wishes will be better set out and made legally enforceable through trusts.

It does not take much to invalidate a will. The things listed above should never belong in your will. Similarly, unenforceable conditions can create controversy and delay the administration of your estate. Discriminatory clauses, illegal actions, or conditions violating a person’s rights can render your entire will or the specific provisions invalid. An experienced estate planning attorney will help you draft a will that is legally sound and secure. If you would like to learn more about wills, please visit our previous posts.

Reference: mondaq (July 10, 2023) “13 Things You Should Never Put In Your Will”

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Be cautious using Portability in a Second Marriage Estate Plan

July 19, 2023

Be cautious using portability in a second marriage estate plan. Despite its advantages, portability isn’t always the solution, even as it’s been used to take the pressure off couples to focus on using as much estate and gift tax exclusion as possible after the first spouse’s death. According to a recent article from Wealth Management, “Portability and Second Marriages,” portability might be a mistake.

The couple and their estate planning attorney need to consider whether leaving the executor with the discretion to use portability is appropriate, and if it is, who the executor should be and how the estate tax burden should be allocated.

The problem with portability in nonstandard families is this: it allows the surviving spouse to use the DSUE (Deceased Spouse’s Unused Exemption) amount personally, instead of requiring it be used for the beneficiaries of the first spouse to die. It’s almost like leaving assets outright to the surviving spouse. In the case of a testate decedent, Treasury regulations provide that only the executor may make the portability elections. The executor should probably not be also a beneficiary and should not be responsible for making the portability election.

Let’s say the estate isn’t large enough to require an estate tax return filing. If the executor is a child from a prior marriage, they may not choose to incur the expense of filing an estate tax return solely to make the portability election for the second spouse. Instead of having the family involved in a disagreement over the need for a return or determining who will pay for its preparation, a better option is to have the estate plan direct whether an estate tax return should be filed to elect portability and if this is done, establish who is responsible for the cost of the preparation and filing.

In complex families with children from a prior marriage, a Qualified Terminable Interest Property (QTIP) trust is used for the surviving spouse, with the trust assets eventually passing to the client’s descendants. However, if the QTIP trust is combined with portability, the estate plan may not operate as intended.

Here’s an example. Ted marries Alba several years after his first wife, Janine dies. Ted has three children from his marriage to Janine. He bequeaths most of his estate to a QTIP trust for Alba and the remainder to his children, naming Alba his executor. At Ted’s death, Alba elects QTIP treatment for the trust and portability. She then makes gifts of her assets to her family using Ted’s DSUE amount. Alba dies with an estate equal to her basic exclusion amount, which she also leaves to her family. The QTIP trust pays estate tax, and Ted’s children receive no benefit from Ted’s exclusion amount.

Even if Alba didn’t make gifts to her family, assuming her estate was large enough to absorb most of her applicable exclusion amount (including the DSUE), the QTIP trust would have to contribute to pay the estate taxes attributed to it unless the estate plan waives reimbursement. Thus, the QTIP trust could bear most or all of the estate tax at the death of the second spouse, while the second spouse’s personal assets are sheltered in part by the deceased spouse’s DSUE amount.

In cases like this, the prudent course of action may be to use traditional credit shelter/marital deduction planning. If there’s a DSUE amount available, the estate plan could direct whether it will be used and how the tax burden on the QTIP trust is handled.

Be cautious using portability in a second marriage estate plan. An experienced estate planning attorney will look at the family’s situation holistically and evaluate which strategies are most appropriate to distribute the property per the parent’s wishes to minimize taxes and ensure that the estate plan achieves its goals. If you would like to read more about estate planning for second marriages, please visit our previous posts.

Reference: Wealth Management (June 21, 2023) “Portability and Second Marriages”

Only leave Assets to Minor through a Trust

July 12, 2023

The only way to leave assets to a minor is through a trust. Otherwise, the assets can create a tangled mess for heirs. A recent article from yahoo! finance, “Can I Name a Minor as a Beneficiary?” explains how to address this fairly common issue. An estate planning lawyer will be able to help you set up the right kind of trust.

Property and estate laws are all state specific, with each state having its own laws for property rights, insurance, and estate laws. Even the age at which a person becomes a legal adult varies by state. A local estate planning attorney will be needed to ensure that your wishes comply with your state’s laws.

Four primary documents are used to name a beneficiary:

Wills: the beneficiary is someone named to receive assets from the estate.
Life Insurance: the beneficiary is the person who receives a payment from the life insurance policy after the policyholder’s death.
Retirement Accounts: the beneficiary receives the assets in the account after the account owner’s death.
Trusts: the beneficiary receives assets from the trust based on the terms of the trust and the trustee’s management.

Legal minors are children who have not yet reached their state’s age of majority. Most states set the age of majority at 18, although a handful of states use ages 19 or 21 when a child becomes a legal adult. Legal minors may not take legally binding actions, including signing enforceable contracts or participating in financial transactions. They also may not inherit directly through a will or receive assets through a life insurance policy or retirement account.

However, minors may be beneficiaries of a trust, since the trust’s beneficiaries do not participate in contractual or financial transactions. The trustee manages the assets in the trust and distributes them per the trust’s terms. This can range from making college tuition payments or sending assets to the beneficiary in a simple property transfer.

Most people expect that their children won’t inherit from a will or a life insurance policy for many years,.However, what happens if the parent dies while the child is still underage? If this happens, the assets are distributed to an entity that can legally receive the property and hold it on the minor’s behalf until they reach the age of majority.

There are typically three scenarios:

Legal Guardian. The guardian receives the assets and holds them on the minor’s behalf until they reach legal age.

Custodial Account. Assets are placed into an account, and a legal adult is appointed to manage the assets until the minor reaches the age of majority. This varies depending on the nature of the assets and the custodian. A parent or guardian typically acts as the custodian. However, the court will name a guardian if there is no parent or guardian.

Trust. Assets are placed in trust on behalf of the legal minor. A legal adult is named the trustee to manage the trust, with the legal minor named the beneficiary. If no trust has been created, a probate court oversees the creation of a trust and distributes all of the assets when the child reaches majority.

IRA or Retirement Accounts. IRAs or retirement accounts are treated differently. Under the SECURE Act, a minor may only take assets from an IRA and must leave the money in place once they turn 18. Then they must take all assets out within ten years.

Leaving the distribution of assets to a beneficiary without proper planning could place a minor’s financial well-being at risk. Only leave assets to a minor through a trust. A court-appointed custodian is probably the last way any parent wants their child to receive assets. Parents with minor children are advised to meet with an estate planning attorney to ensure that their children are protected should unexpected events occur, such as the death of one or both parents while the child is not yet of legal age. If you would like to learn more about asset distribution, please visit our previous posts.

Reference: yahoo! finance (June 19, 2023) “Can I Name a Minor as a Beneficiary?”

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Dying Intestate can leave Family financially Crushed

July 11, 2023

Dying intestate can leave your family financially crushed. Dying intestate can mean either that you didn’t have a will or that you had one, but it was held to be unenforceable for some reason.

Intestate inheritance is governed by state law. Every state has its own set of statutes that stipulates who inherits and in what order. These laws are called the laws of succession or the laws of inheritance. The Uniform Probate Code is a template for inheritance laws, and many states have based their own code on the UPC.

Yahoo’s recent article, “What Happens If I Die Without a Valid Will?” explains that the probate courts govern intestate estates. An intestate estate goes through the same three-step process as a testate estate. Attorneys get paid first; debts, taxes, administrative fees and other legal liabilities are paid second, then the heirs receive their portions.

Most state probate codes distribute assets based on the closeness of relation to the deceased. The close relatives inherit before distant relatives in “tiers” of inheritance. Most states’ laws say that intestate succession will proceed in the following order:

Spouse
Legal descendants (i.e., children)
Parents of the decedent
Siblings of the decedent
Grandparents of the decedent
Nieces, nephews, aunts, uncles and first cousins.

As a general rule, any given category of an heir will inherit the entire estate, which is divided into pro-rata shares among all heirs; for example, if an individual died intestate with no spouse, children, or surviving parents, but two sisters and several aunts and uncles. The two sisters would each receive half of the estate, and the aunts and uncles would get nothing.

The big exception to this rule is spouses. In most cases, a spouse will automatically inherit all non-marital assets. However, the Uniform Probate Code does have exceptions for heirs, such as parents and descendants. This is important when it involves children to whom the surviving spouse is not related.

If someone dies intestate and they have no legal living heirs, their assets go to the state. Dying intestate can leave your family financially crushed. The simplest way to avoid this is by working with an estate planning attorney to craft a Will or Trust. If you would like to learn more about drafting a will, please visit our previous posts.

Reference: Yahoo (January 27, 2023) “What Happens If I Die Without a Valid Will?”

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Category: Inheritance

Do You Need a Will or Trusts or Both?

Add your Pet to your Estate Plan

Ways to use a No-Contest Clause in your Planning

The Safe way to Pass on Family Heirlooms

How an Intentionally Defective Grantor Trust Protects Wealth

When Life Insurance becomes Taxable

Things that should Never Belong in Your Will

Be cautious using Portability in a Second Marriage Estate Plan

Only leave Assets to Minor through a Trust

Dying Intestate can leave Family financially Crushed

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