What happens if I die without having a Will or Trust?

If you die without doing any estate planning, then state law will decide what happens to the estate. Following are some examples of how the assets are distributed under most state laws:

1. If a couple is married with no children, the assets will pass to the surviving spouse. If a couple is married and all of the children are the couple’s biological or legally adopted children, then the assets of the deceased spouse will pass to the surviving spouse.

2. If a couple is married but one of the spouses has children with someone other than their spouse, the assets are divided: one-half to the surviving spouse and the other half in equal shares to the children of the deceased.

3. If someone is unmarried with no children, their assets will pass to their parents. If they have no surviving parent, the assets will pass to their brothers and sisters or to the children of deceased brothers or sisters.

4. If someone is unmarried with children, their assets will pass in equal shares to their children. The court will appoint a guardian/conservator to handle the assets of any child under the age of eighteen (18).

The above examples do not apply to every state and many states have variations on the above examples. Please refer to state specific laws when determining distributions without a will or trust.

In many cases, the above distributions are not what people want. Additionally, the way property is distributed under state law is through the probate process. 


What is Probate? 

Probate is the legal process to determine who should receive a person's property and assets at death. It is the only way to legally change the title of property when the owner has passed away. Probate operates according to state law and can be a complicated and expensive process. The AARP estimates that the average probate cost is 3-8% of a person’s estate and lasts about nine months to two years.

Not all assets a person owns are subject to probate. The following assets are not subject to probate as long as the named beneficiary is alive, over the age of eighteen (18) and competent: bank accounts, brokerage accounts, life insurance policies and retirement accounts (Pensions, 401(k), IRA (Individual Retirement Accounts), Annuities, etc.). However, many assets such as real property, stocks, and accounts with improper or incomplete beneficiary designations may be subject to probate.


Who will act as Guardian for my minor children?

If there are any children under the age of eighteen (18) some essential questions need to be addressed. For example: Who will raise the children if both parents pass away? Who will manage any cash or assets the children might inherit? At what age will the children inherit?

By doing nothing, the state will decide these questions and the answers may be different than what most people want. For example, the state will decide the guardian and conservator. Additionally, in most states children will inherit the property at age 18. This is usually not the best age to receive a large amount of money.


What will happen to my home (Real Property)? 

If an individual owns property (either outright or mortgaged) and passes away without any estate planning, the property must go through probate before it can be distributed to the heirs.

If a couple owns property (either outright or mortgaged) as Joint Tenants and one of the spouses passes away, then the surviving spouse will have complete and immediate ownership of the property without probate. This is called “Joint Tenancy with Full Rights of Survivorship”. When the surviving spouse passes away or if the couple passes away at the same time, the property must go through probate before it can be distributed to the heirs.

Joint tenancy is common between spouses that buy property and want to share ownership, including inheritance rights. But transferring property to joint tenancy with someone else (such as children) simply to avoid probate creates several problems. For example, if a couple put their adult children on their property as joint owners, they would give up partial ownership of the property. The new owners could sell or mortgage his or her share, or it could be lost to their creditors in a severe debt situation. The property could also be lost if one of the children was sued, had a bankruptcy, got divorced, had an IRS tax lien, etc. Also, if one of the joint tenants became incapacitated and could not make decisions about the property, the other owner would have to go to court to get the authority to sell it or obtain a mortgage. Additionally, when putting other joint tenants on property, there may be capital gains problems when the property is sold.