Intestate succession is one of the most stressful events for families and executors in the entire probate process. But although it occurs often, intestate succession is completely avoidable.
Let’s take a look at what intestate succession is and how it can be avoided.
What is Intestate Succession
Intestate succession is the distribution of assets when a person dies without a valid will or other legal statement.
The will is the single most important document when it comes to estate settlement. Unfortunately, an estimated 60% of Americans die each year without a will, which is known as an intestate death.
Dying intestate—without a will—creates uncertainty in the probate process. During their lifetime, the estate owner may have had plans for what would happen to their assets upon their death. None of that matters if the deceased passed without a will.
Since there’s no will to dictate who gets what—or how the deceased wanted their funds distributed upon their death—the probate court must distribute property in accordance with existing state law.
This leads to some obvious questions:
How does a court know what the deceased planned for their assets? The short answer is that the court doesn’t know.
What if two beneficiaries both believe they’re entitled to receive a certain asset? Well, in that case, you’ll likely have a legal battle on your hands.
We could go on and on, but the main point is that intestate succession is complicated. It’s messy. It’s costly.
In short, intestate succession is something you want to avoid.
If an estate does end up going through intestate succession, though, we’ve got you covered.
Intestate Succession: Who Gets What?
Intestate succession laws vary from state to state, but the order of distribution typically follows the same pattern. Although there might be slight variations in your state, you can rely on intestate succession to follow a similar pattern.
If you die without a will, your assets will go to the following people in this order:
- Your legal partner or spouse.
- Your children (including legally adopted children, but not step-children who you did not adopt).
- Your parents.
- Your siblings.
- Your grandparents.
- Your aunts and uncles.
- Your nieces and nephews.
- Your next of kin.
You can see how problems might occur with intestate succession.
Regardless of how you feel about your spouse or legal partner, that individual will receive all of your assets that go into probate upon your death.
And regardless of how you feel about your spouse, your best intentions may be completely ruined by the intestate distribution that occurs upon your death.
If you wanted to only give your spouse a portion of your assets but transfer other assets to your children or your siblings upon your death, you would be out of luck.
Here’s the key to remember:
If you die without a will, your best intentions don’t mean anything.
Are Friends Included in Intestate Succession?
You might have noticed a glaringly obvious omission in the intestate succession list: friends aren’t included.
Most individuals want to leave a gift to their close friends upon their death. It’s not uncommon to see wills where the deceased stipulated that a certain amount of money was to be given to a close family friend upon the deceased’s passing.
In intestate succession, friends are never included in the distribution list.
It doesn’t matter how close you are to your friends. They might be friends that you’ve had for 70 years. They might be friends who feel more like family than the actual family you have.
None of that factors into the probate process. Friends are never included in intestate succession.
What is Escheatment?
The last line of the intestate succession list shows that assets pass through escheatment when no next of kin is living.
Escheatment is when your assets go to the estate upon your death
Escheatment is when your assets go to the estate upon your death. This will occur if the probate court tries but fails to find any of your living relatives. In that event, the state is legally permitted to take all of your assets as its own.
Yeah, talk about a big tax bill.
If an individual does pass away without any known living relatives, the good news is that those funds aren’t actually lost forever.
Escheatment laws are controlled by states, as the federal government has no jurisdiction over escheatment between states.
If you’re curious to learn more about the escheatment laws in your own state, you will likely be able to find more information on the state comptroller or treasurer’s website.
In North Carolina, for example, the Department of State Treasurer publishes updated guides on escheatment and the rules surrounding escheated funds.
Why does this matter?
Well, let’s consider the following scenario:
Example 1: Wyatt, a 98 year old widower who resides in North Carolina, passes away intestate, or without a will. The court follows North Carolina intestate succession laws and works to locate any possible beneficiaries who would receive assets from Wyatt’s estate. Although the court conducts its due diligence to locate any beneficiaries, the court cannot locate any relatives or next of kin who would receive assets. Because no next of kin can be located, the assets in the estate escheat to the state. 3 years after Wyatt’s passing, though, a distant nephew emerges and claims that he is Wyatt’s sole living relative. The nephew states that he was living abroad during Wyatt’s death and was not aware of Wyatt’s death until recently. After completing an application to the state and undergoing a lengthy due diligence process, the nephew is able to reclaim the funds from his deceased uncle’s estate.
Although possibly far-fetched, it is important to note that these types of scenarios do occur. All states track their unclaimed assets, and most states make the total figure of unclaimed assets available to the general public.
Some states have a large share of unclaimed assets. At the time of this article’s publication the state of New York has over $18.4 billion in unclaimed assets.*
North Carolina’s unclaimed assets are a bit smaller, at only $1.2 billion.* But still, who wouldn’t mind reclaiming just a portion of those funds? That seems like a pretty good day in our books.
It’s important to make the distinction that those figures are all unclaimed funds—not just assets that a state has accrued through escheatment. But still, escheatment is a real possibility that executors should be aware exists.
In the earlier example, Wyatt’s nephew was able to claim the escheated funds 3 years after Wyatt’s death. That works in the state of North Carolina, because local escheatment laws allow for unclaimed funds to be reclaimed within 5 years.
What happens if you don’t claim funds within 5 years? The state then considers the funds to be abandoned and takes full ownership over the assets.
Let’s take a quick look at a second example:
Example 2: Marley, a 74 year old widow who resides in North Carolina, passes away intestate in early 2023. The court follows North Carolina intestate succession laws and works to locate any possible beneficiaries who would receive assets from Marley’s estate. Although the court conducts its due diligence to locate any beneficiaries, the court cannot locate any relatives or next of kin who would receive assets. Because no next of kin can be located, the assets in the estate escheat to the state. 7 years after Marley’s death, an estranged granddaughter petitions the state to return the escheated funds. Because the granddaughter did not emerge before 5 years, though, the state of North Carolina is able to keep the funds.
Each state is different, so the 5 year period might not apply to your current state. When it comes to escheatment, it’s important to conduct as much research as you can to learn about the intricacies of your state’s laws.
What Assets Are Not Included in Intestate Succession?
Intestate succession only includes the assets that actually go through the probate process.
Although state laws can vary across which assets are subject to probate, the following assets will generally be excluded from probate and intestate succession:
- Assets put into a trust
- Payable upon death (POD) accounts
- Transfer upon death (TOD) accounts
- IRA accounts
- 401(k) accounts
- Other retirement accounts
- Funds held in a pension plan
- Property owned as joint tenants
- Life insurance proceeds
- Property owned under community property laws
- Health savings accounts (HSA's)
If you own any of these assets, you don’t need to worry about the possibility of these assets going through the intestate succession process.
These assets are generally set up with designated beneficiaries, so they will bypass the probate process and go directly to beneficiaries that you have already chosen.
Intestate Succession: Key Terms
A number of terms are thrown around in the intestate succession process, but we’ve compiled a quick list of key terms to simplify the process:
- Testate: Dying with a will
- Intestate: Dying without a will
- Escheatment: When an estate has no heirs of beneficiaries and goes directly to the state where the deceased lived
- Domicile: The deceased’s permanent or true home
- Probate: The legal process to transfer a deceased individual’s assets after their passing
- Heir: Someone who is set to inherit based on intestacy laws when no will has been created
- Beneficiary: An individual who is set to inherit based on the deceased’s will
- Descendants: Blood relatives (son, daughter, grandson, granddaughter, etc.)
Intestate Succession: A State by State Guide
We’ve only just broached the surface of intestate succession, and as you dive into the weeds of each state’s laws you’ll find that intestate succession can be complex.
That’s why we’ve put together a state by state guide to intestate succession.
We’ve done the digging so that you don’t have to. Take a look at your state to familiarize yourself about local intestacy laws and the rules that govern intestate succession.
Take the Next Step with Atticus
If you’re curious to know more about the probate process, check out this awesome Probate 101 guide we’ve put together to help you through the next steps.
Whether you’re a seasoned executor, working through the estate planning process, or just curious to learn more about the subject, we’ve got you covered.
From settling a family member’s estate to searching through a safe deposit box for a loved one’s will, our goal is to make the estate settlement easy and straightforward.