If you pass away, your loved ones should not inherit assets only to find that…
Dying without a will is also called dying intestate. Wills are subject to state law, and as such, intestacy processes vary by state in determining whether a person’s assets go to their spouse, children, siblings, or parents. The probate court system will essentially freeze your assets until the estate has been reviewed in detail. Upon completing the estate review, a court-appointed personal representative, (in New York, an “Estate Administrator”), will apply intestate succession laws and decide on the dispersion of your assets. The process can be long and tiresome for surviving family members but is easily avoidable by having a proper estate plan that includes a will or a living trust in place.
The money in your estate will go through a Surrogate’s Court proceeding (called “probate” if decedent died with a Will, and “administration” if they died intestate), can reduce the time creditors can file claims to as little as seven months. Once the administrator pays off your debts, remaining assets are up for allocations to heirs that vary by state. Each state has a different set of rules. Generally, the spouse has priority, followed by children, grandchildren, parents, and finally, siblings. If there is no spouse and two children, for example, a likely scenario is that both children will be co-heirs by rules of intestacy. The Surrogate’s Court will ultimately decide who will be the person’s administrator of the estate. It is usually the petitioner or the party all beneficiaries agreed to nominate who will end up serving, unless there are complicating factors of the nominated party being a minor, incompetent or a convicted felon. Residency rules may also play a significant role in the fiduciary qualifying for the office. Assets like retirement accounts or life insurance policies will go to the named beneficiary on file with the bank, brokerage firm, the insurance company, and the like.
If you die intestate and have minor children, their rights will be placed under court supervision and discretion as a co-guardian with a court-appointed party (usually a close relative). State judges do all they can to ensure a child’s guardianship is in their best interest. Problems can arise because a judge is unfamiliar with the child and family dynamics. In most instances, a family member will come forward to raise the child or children of the deceased relative. Yet without a valid will, where the wishes could be made clearly known, there is no guarantee that offspring will end up in the household of their parent’s choice.
Your Property and Taxes
Under federal law, if your estate is worth more than 11.58 million dollars, your tax rate is 40 percent. Any estate under this value is generally exempt from federal taxes; however, this amount and the law can change. Some states will tax your property up to 16 percent of the estate value if it is greater than 1.6 million dollars, while other states have a specific formula to divide estate taxes among your spouse and children. Without a will, your spouse may have to forfeit a marital deduction that allows them to inherit your entire estate tax-free if properly documented in your will.
Single, Married, Domestic Partnership
Relationships and their legality matter when determining the inheritance of a person dying intestate. If you are single, several scenarios can occur. If you have children, they will inherit your entire estate. In the absence of children, and if your parents are alive, they would be the next of kin benefiting from your estate. Lastly, your estate will likely be given to your siblings in equal shares if you do not have children or parents who are alive.
If you are married, your surviving spouse will get a portion of your assets in nearly every state. However, rules and regulations vary significantly from state to state regarding the size of the inheritance. If you have had multiple marriages and children from these unions with previous partners, generally, roughly one half of the estate becomes equally divided among those children. The $50,000 off the top plus the other half of your estate would go to your current surviving spouse before the remainder would be distributed to all your children from all prior relationships (not just the current one).
Not every state legally acknowledges a domestic partnership though common-law marriages are accepted in 15 states and the District of Columbia with varying rules for recognition. Domestic partners are given the same rights as spouses in most states, depending on how the property is owned. If you are part of a same-sex couple, your surviving partner will not inherit unless you are in one of the few states that permit domestic partners’ registration to inherit as a spouse.
Without a will or some other legal mechanism to transfer your property upon your death, state law will determine what happens to your property. Most states make your spouse and children your inheritors. In the absence of these, your next closest relative is the likely inheritor. Without any family at all, your property will go to the state. Though state laws vary, the distribution of your property and assets follows a generally similar pattern. Yet, drafting and finalizing a will does not have to be a complex or expensive proposition. To make life easier on your loved ones when you die, it is worth your effort to have a valid will. An elder law attorney specializing in estate planning is the best option to ensure your will is appropriate for the state you live in and your final wishes. Your will is like a final gift to your family and friends. Rather than being mired in the process of you having died intestate, it gives them the time to remember you and celebrate your life.
If you have questions or would like to discuss your own situation in a confidential setting, please don’t hesitate to reach out. You can get in touch with our firm by clicking here to book a complimentary consultation, emailing us at [email protected], or by dialing us up at (212) 920-6371.