Intestate is a legal term that refers to those who have died without drafting a will. When this happens, there’s no legal document to dictate who inherits the deceased person’s property.
The decision to control the distribution of property belongs to the state. There are laws for this process in every state.
These intestacy laws vary slightly, but they all have one thing in common: They provide a mechanism by which your property is distributed upon death without a will or trust.
How Intestacy Works
Intestate laws are governed by statutes in each state. In most states, statutes provide a set order of priority when determining who will receive your estate in the absence of a legal document such as a will or trust that directs distribution.
If you pass away, then your estate must go through probate court proceedings to determine how it is distributed. If you do not have a will or trust, your estate is intestate.
The statutes create five classes of inheritors per state. Within each class, the laws determine who among those in the class is entitled to inherit property from deceased individuals.
1) If you are married then intestate law clearly designates that spouse as your sole inheritor.
2) If you have children with multiple people then the law designates that each child will receive an equal portion of the estate.
3) The law also provides rightful ownership to a parent or descendant from a previous marriage.
For instance, if you have a child from a previous marriage, intestate laws specify that the parent or descendant from that marriage may also inherit property.
4) If none of these conditions is true then the law designates ownership of the property to the person with whom the deceased person last shared a residence.
5) Finally, the law specifies that if a property is not claimed by its rightful owner, then it will go to the closest surviving relative, which must be a member of the fifth class.
Why Does Intestate Succession Matter?
The intestate succession laws in each state were created to ensure that if a person dies without a will, the distribution of his or her property is not left to luck.
It ensures their family and closest loved ones receive what they are entitled to under succession laws.
If there’s no will or trust, the law takes over and determines who receives the deceased individual’s assets.
If intestate laws are not followed, the property can be distributed amongst strangers or different family members that were not intended to inherit under intestacy laws.
Risks of Dying Intestate
If succession laws are not followed, your heirs could lose out on important benefits that could be received under intestate succession.
For instance, if intestate laws are not followed then the following risks may occur:
1) It is possible that family members can lose key protections against creditors who haven’t received compensation for their claims. For instance, your creditors can access your intestate property and use it to settle debts.
2) Your family could receive less than what you actually wanted them to have under intestate succession. For example, intestate laws may not leave a specific amount to a certain person or family member.
3) Heirs can lose tax benefits or be taxed on an increased percentage of the estate if they receive more than their share. As an example, intestate laws may designate that an heir receives 40% of the property, which is not exempt from inheritance taxes.
4) Heirs can also lose valuable rights to the property if intestate succession is not correctly carried out such as the right to use the property as collateral for securing a loan.
5) Distribution of your assets will be determined by how much each beneficiary values what you left behind, rather than how much they actually need. For instance, the law may distribute your property to distant relatives or neighbors that are not in need of the property.
How to Avoid Intestacy
There are three succession laws that must be followed to avoid intestate problems:
Each state requires you to leave a will if you want your estate distributed according to your wishes after death.
The property may not be entirely distributed based on the succession statutes, but it can allocate resources in a way that is different from intestate succession laws.
This type of legal document can be revoked anytime when the creator is still living so it does not become irrevocable after death.
Joint Tenant With Right of Survivorship Deed
These types of deeds form joint ownership between two people so if one of the owners dies then the other will receive 100% of the property.
Do I Need an Attorney to Help With This Process?
Determining intestate succession can be complex. A living will or trust can help you direct how your property should be distributed, but intestacy laws may not agree with how you distribute your assets in either of these documents.
The reason why it’s important to talk to an attorney who understands these laws and who can assist with the process. They will help ensure assets are distributed according to intestate succession laws.
Benefits and Drawbacks
There are a few benefits to intestate succession.
One of the biggest is that intestacy laws remove issues of legality from distribution decisions. In other words, the law ensures your property will not be distributed amongst strangers or those you would rather see it go to.
Another benefit is that this makes the distribution of an estate much quicker and easier for lawyers to handle.
However, intestacy laws can also have many drawbacks.
For instance, these laws can lead to the property being distributed amongst family members that you would rather see your assets go to.
Probate is another drawback of intestate succession. The process can be slow, sometimes taking months or years to complete, depending on the size of the estate.
Finally, the laws may require your family members to take time off of work and sit through the probate process. If these laws are not followed, your family could find themselves in a public battle over succession and who gets what property.
In some cases, intestate succession is required by law, but in others it is optional.
The decision to use intestacy laws should be made carefully and with the advice of a probate attorney.
An attorney will know what laws exist in your state and can help you avoid intestate problems.
They can also help draw up the necessary documents to make sure your intestate succession goes smoothly and according to your wishes.
Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.