When you die without leaving a will, you are said to have died “intestate” and the government decides how to distribute your property according to the laws of intestate succession. These laws may or may not allocate assets in the manner you would choose.
If you are married and have children, the laws generally divide the property between the spouse and children, but the outcome will vary depending on whether any of the children come from a relationship with someone other than the current spouse. In other words, blended family situations can be quite complex!
In situations where the deceased person has no spouse or children, the estate would go to their parents, or if they are not living, to siblings. If there is no immediate family, the court will seek out any nieces or nephews. When the state cannot find any relatives at all—no aunts, uncles, or cousins—then your assets may end up going to the state, but this rarely occurs. If you haven’t left explicit instructions, or if your will is old or out-of-compliance with the current laws, your next of kin may have difficulty gaining access to your assets.
In most cases, a well-executed will might spend only a brief time being reviewed or adjudicated by the probate court. When a will is entered into probate, the process can take 6-9 months, and in some cases, several years to complete. However, if there are no issues with the will or challenges by potential heirs, the probate process might take only a couple of months. None of your inheritors will have access to any of your assets until the probate process is complete. If you want to avoid probate court, or make sure your heirs can access your assets without delay, consider forming a revocable trust.
Why You Should Create a Will or Trust
It’s important to realize that if you want to divide your assets in a way that differs from how your state automatically assigns them, then you must make some kind of legal plan that will take effect at your passing. Estate planning is necessary to ensure that your assets are distributed according to your wishes after you pass. However, estate planning covers a lot more than just creating a will.
A will is the most basic document that people think about when planning for how to pass on their estate, but there are further steps you can take to protect your assets and minimize the burden on your heirs. A detailed estate plan does more than just designate how much of your property goes to each heir. It safeguards valuable information and gives your family a clear path to deal with a variety of issues after your passing.
What Should a Good Will Contain?
A standard will, or last will and testament, is normally comprised of four parts. Each one answers a different question about your assets and how they will be distributed:
- How will your final bills be paid?
- How will the cost of settling your estate, and any estate or inheritance taxes, be paid?
- Who is in charge of overseeing your estate settlement? This section designates your Personal Representative/Executor and what powers they will have. If you have children who are not legal adults when you pass away, this part of the document describes who will become their Guardian or Conservator and be responsible for raising them.
- Which people will receive the balance of your estate? This section also covers the timing and method by which assets will be distributed.
What is a Revocable Trust?
A revocable living trust involves a written agreement that defines how your assets will be dealt with both before and after death. Usually the trust is set up to allow the creator to retain control of all the assets until they either die or become incapacitated. The trust can be structured to allow another trustee to deal with your affairs in the case of your mental incapacity or serious illness. The trust document also determines how your beneficiaries will receive your assets after your death.
After creating a trust, you place most or all of your accounts and assets in the trust’s name, then assume the role of trustee. Your designated beneficiaries can take control of trust assets immediately after your death.
You Could Avoid Probate Court if You Form a Living Trust
If you place all of your assets into a revocable living trust before your death, the assets in the trust won’t go through probate court. But to fund the trust, you have to put any bank accounts or real estate holdings you want managed this way into the trust’s name. Afterward, the trust owns the assets, which you (and then your heirs) simply administer. For assets such as life insurance or retirement accounts, you must name the trust as a beneficiary. Any assets placed into the trust’s control will skip the probate process. If you still have assets the trust does not control, be sure to have a will or appropriate beneficiary clauses to designate how those should be distributed.
This article is not an exhaustive coverage of how professional estate planning can help you and your family deal with the aftermath of your death. An experienced estate planning attorney can help you implement numous legal strategies that reduce your beneficiaries’ tax burden and simplify the process of executing your last wishes.