One of the worst times for a family can be after a loved one passes away. This time can be especially difficult when the person who died did not leave behind clear directions for what should happen to their assets or belongings.
What happens if you pass away without a last will and testament?
Table of Contents
- Personal Representative
- Properties in Multiple States
The State Assigns a Personal Representative
If you die without a will, your estate will be “intestate”.1 A court will first freeze all your accounts and assets and no one will have access until a personal representative has been appointed — even in the event that you already stated informally that someone may have something in the estate. Assets such as bank accounts, real estate, and securities can only be released once the state has chosen a representative.
There are two exceptions to the frozen assets rule.
Life Insurance Payouts
When signing a life insurance policy, one of the forms filled out will include who you would like to inherit your life insurance should you pass away. If at least one of your beneficiaries survives you, the life insurance payout will not go through probate, which is the official process in which a court determines that a will or testamentary document is valid.6
Because these funds are able to bypass the probate process, they do not have to be used to pay any debts you leave behind, and the funds are distributed by the insurance company, not by the state.6
Payable-on-Death (POD) and Transfer-on-Death (TOD) Designations
Once beneficiary designations have been made, these will also be left out of the probate process. Payable-on-death account beneficiaries must only go to the bank that holds the account and show proof of death for this to take place. There are some states that may require certain taxes to be proven paid,7 but otherwise, there will not be a freeze for these funds.8
Transfer-on-death designations are the same as payable-on-death, but they are used for stocks, bonds, or brokerage accounts. Nearly every state has adopted some version of the Uniform Transfer-on-Death Securities Registration Act and will allow the beneficiary to claim the account with the proof of death, without the need for the account to pass through probate.8
Relationships Without Wills
Your relationship status can determine who may collect assets upon death. Let’s review what happens when there aren’t wills in place in the following instances.
What Happens if You’re Married?
If you have a surviving spouse, the state will typically make that person the personal representative,2 however this is not always the case. Situations with ex-spouses may be unique, and many will feel they are the right choice for the job.
Parents, siblings and children are all options the state could choose, but if you are married, they will typically choose the surviving spouse.
What Happens if You’re Single?
If you are single and do not have children, your parents are typically appointed as the representative.
Your parents also will inherit your entire estate without a will in place — regardless of how weak or strong the relationship was with you. Any debt you have will be first paid out of the estate’s assets, and then the parents will get the remainder.2
If one of your parents has passed away, the rest of your estate after debts have been taken care of will be divided between your surviving parent and your siblings.2
When you are single, and you have children, your children would inherit your entire estate.3 If your children are still minors at the time of the inheritance, the court can appoint a guardian to look after the inheritance until the child is the “age of majority”, which in most cases is 18-years-old, but could be 21 depending on state laws and inheritance amounts.4
A parent can be appointed guardian of a child’s inheritance, but in some states, if the inheritance is over a certain amount, a court-appointed guardian must be chosen.4
Let’s look at an example.
Carl is 25, single with no children, and he has one dog. Like most 25-year-olds, Carl has not drawn up a will to designate who will get his estate or what he would like to happen to his dog should he pass away.
When Carl dies, his debts are paid out of his estate, and the remainder will be divided by his surviving parent and his brother, to whom he has not spoken in years. They will also be able to decide what happens to his dog.
If Carl had drawn up a will prior to his death he could have left his dog to a specific close friend, and given the remainder of his estate to his surviving parent who he helps provide for.
What Happens if You’re Unmarried but in a Domestic Partnership?
If you’re in a domestic partnership, the risk of not having a will in some states is greater than others. Some states do not recognize domestic partnerships, so each state will be different. If it has been determined that your state does recognize domestic partnerships, your domestic partner will be treated as a spouse and given the same rights.3
What Happens if You’re Unmarried but in a Relationship?
In today’s society, it is not uncommon for a couple to live together as partners without being legally married. Unfortunately, without the legal agreement, a significant other would not be recognized during the division of your estate.
Unmarried couples are not eligible to inherit property, assets, or belongings, and they would be divided among living relatives based on state-specific laws.1
What if You Own Property in More than one State?
If your estate includes property located in multiple states, then the estate will be subject to intestacy rules in multiple states. This could mean more than one beneficiary is chosen, since they will be governed by different state-specific intestacy laws.5
How Will Taxes be Calculated on Your Estate?
Each state’s taxes are slightly different on estates, so be sure to look at your specific state for applicable law. Some states tax estates up to 16% if it’s worth over $1.6 million, and other states have a specific formula to break down the taxes by beneficiary.3
Under Federal law, the estate will be taxed 40% if it’s worth over 11.7 million. Anything under that is typically exempt from federal taxes.3