Intestacy – When There Is No Will

Fortunately, the state does not automatically get the property.

Many individuals die intestate, which means without a will. In these cases the deceased's property is distributed by state law. Each state has a law that attempts to distribute the property just as the deceased would have wished had she made a will. Of course these statutes cannot duplicate what the deceased could have done herself. But in cases of intestacy, what the deceased really wanted is irrelevant. Despite intestacy statutes, there are a surprising number of complications in this area.

DYING INTESTATE

If an individual dies leaving a valid will, he dies testate, which is Latin for "with a will." If he dies without a valid will, he dies intestate. Although some individuals believe that the state will automatically get their property if they die without a will, this is not true. However, if a person dies without a will and there are absolutely no surviving blood relatives, then the property does go to the estate. This reversion of the property is called escheat.

The Administrator

When an individual dies without a will, the estate still needs to be administered. The probate court will appoint an "administrator" rather than an executor. The administrator has the same duties as an executor. The big difference is that the administrator will distribute the estate according to the state's intestacy statute rather than a will.

Intestacy Statutes

All states have an intestacy statute that controls the distribution of a person's property if he dies without a will. In fact, many people do die without a will, either because they failed to plan ahead or because their will was invalid for one reason or another. Generally if an individual fails to write a will, the law will write one for her. Because it is impossible for the law to tailor a will to every individual's family circumstances, the law attempts to write a will that the average person would have written.

Which State Law Controls?

Intestacy statutes vary from state to state. For ex-ample, in some states, surviving parents of the deceased get a share of the estate while in other states they do not. So, in some states a surviving spouse may unexpectedly have to share an estate with her mother-in-law. The state law of the decedent's domicile controls. Domicile is the place where the deceased resided on a permanent basis. Domicile includes two elements, physical presence and the intent to reside permanently. Domicile is not always clear if an individual has two or more residences in different states.

OBSERVATION Because of state variations in the laws, certain family members may benefit financially by a particular determination of the location of the probate proceedings.

Disadvantages of Intestacy

A person who dies without a valid will not only has no control over the distribution of property, but also is unable to designate the executor who will administer the estate after death. Accordingly, an individual who dies intestate cannot choose who will take possession of all the deceased's property and distribute it according to the deceased's wishes.

Only a will or a living trust can direct property to go to specific heirs. The intestacy statute cannot make a special provision for a child with medical problems, nor can it provide any estate tax savings. For an unmarried couple, if either partner dies without a will, there are disastrous consequences for the surviving partner because he will probably receive nothing.

CAUSES OF INTESTACY

Intestacy statutes apply in three situations:

1. when there is no will,

2. when there is a "lost" will that cannot be found, and

3. when there is a will, but it is not legally valid.

No Will

There are two reasons that explain why an individual might die without a will:

1. he or she never wrote a will, or

2. he or she wrote a will but revoked it and never replaced it with a new one.

Will Never Written

A surprising number of people die without having ever written a will, including many lawyers. Even Abraham Lincoln died intestate. Although it is relatively easy to make a will, sign it, and get it witnessed, people procrastinate for a variety of reasons. Dealing with death is never easy, and few people consider their own death unless they discover they have a terminal illness.

Revoked Will

An extremely troublesome area of probate administration involves revoked (canceled) wills. There are a lot of evidentiary problems involved and many state-by-state variations in what constitutes a valid revocation. If it appears that the deceased did have a will but revoked it, it is essential to understand some of the rules that determines what happens in probate.

Wills are considered ambulatory, which means that they can be changed or revoked (canceled) at any time. This is true even though other individuals know the will's contents and have relied on anticipated gifts for financial security.

Methods of Revocation. A will can be revoked in a number of ways. A will can be revoked by a physical act - by tearing, burning, or marking "revoked" or "canceled" on the will. Somewhat surprisingly, no witnesses need be present for the act of revocation. However, many states require the deceased to have had testamentary capacity at the time of the revocation. If the revocation occurs when the individual did not have full mental capacity, the revocation would be ineffective. In fact, at a certain point, a person with diminished mental capacity is neither capable of making a new will nor of revoking an old one.

WARNING The fact that no witnesses are required to revoke a will could lead to a counterfeit revocation by a family member who stands to gain from having the deceased die intestate.

The most common way to revoke a will is by the execution of a later will that expressly revokes the earlier will. Even if the second will does not expressly state that the first will is revoked, the courts interpret the mere execution of the later will as revocation of the earlier one. A will is also revoked in many states by remarriage, although the laws of states vary on this point.

Irrevocability. There are a few exceptions to the rule that a will can be revoked. For example, when the deceased entered into a "contract to make a will" that obligated him to put certain provisions in a will. In some states a joint will is irrevocable after the death of one of the parties. A joint will is really two wills written on one piece of paper (typically by a husband and wife leaving all their property to one another).

A will is not revocable when a spouse enters into a divorce decree that obligates him to leave certain property to his ex-spouse in his will. He has obligated himself by a contract - here the divorce decree - to write the will in a certain way. In the absence of such a contract, a will can be changed or revoked entirely. When a will is revoked and not replaced, the individual has no will. If the person dies before a new will is written, the person dies intestate.

Although these rules seem relatively straightforward, the legal system has created some more exceptions (or perhaps exceptions to the exceptions).

Revival of Revoked Wills. In many states a revoked will may be "revived" by re-signing the will and having the signature properly witnessed. Many state laws also provide that a revocation of a will can be conditional, that is, the revocation will not be effective unless a specific event occurs.

In addition to the revival doctrine, a number of states recognize the doctrine of "dependent relative revocation." This doctrine revives a revoked will if the revocation was induced by a mistake of law or fact. A few courts have gone so far as to revive a will if the deceased anticipated executing a new one but failed to do so.

EXAMPLE Harold revokes his will, telling his spouse that he intends to visit his lawyer the next day to write a new one. Harold dies in his sleep. The court may revive the revoked will on the basis that Harold indicated his intention to execute a new will and on the belief that he would have preferred dying with the old will rather than without any will. Not all courts would make a similar ruling.

Lost Wills

Individuals sometimes draft a legally effective will, but the family is unable to locate it at the time of the person's death. A few states have a registry of wills at the courthouse, but many states do not. Although most people give a copy of their will to close family members, other individuals are secretive and don't want family members to know the exact contents of the will. There are a number of reasons for such secrecy. The testator may want to avoid any hard feelings that might be engendered by revealing the will. They may expect to change the will in the future, and the new will would cause a hardship on beneficiaries who are expecting a windfall. Whatever the reason, some individuals don't share copies of a will and this secrecy can cause problems.

The executor and family members may simply be unable to locate the will even though the deceased mentioned that he had one. If an exhaustive search through the family home, business office (if any), and bank safe-deposit box reveals nothing, the will may well be lost. Attorneys often keep copies of wills they draft - in some states this is required - but lawyers die, and law firms disband over time. The older the will, the less likely it will be found. Legal newspapers (special publications aimed at lawyers) typically run advertisements for "lost wills." The process of placing such an ad is referred to as a will search. If the lost will cannot be found, the deceased will be considered to have died intestate.

OBSERVATION The will could have been wrongfully destroyed by a family member who stands to inherit more through intestacy than through the will. If wrongful destruction of the will is suspected, beneficiaries can petition the court for help, especially if there is any evidence of the original will, even an unsigned, unwitnessed copy. Testimony must be introduced by individuals who witnessed the lost will. This is a very difficult kind of case to prove in court. Clearly, the most trustworthy evidence of a will's existence could only be provided by the decedent. Moreover, witnesses may be unknown, or dead.

Invalid Wills

Although intestacy normally occurs when no will has been written, it also occurs when a will has been written but the document is legally invalid for one reason or another. There are three common reasons for a will to be invalid:

1. lack of formalities,

2. lack of testamentary capacity, or

3. fraud or undue influence.

When a will is presented for probate, interested parties (usually relatives) may come forward to challenge the will, arguing that it should not be probated because the document lacks the required formalities, because the deceased lacked testamentary capacity, or because the will was the product of fraud or undue influence.

Lack of Formalities

It is not enough for the deceased to have planned and written a will. The will also must be signed and properly witnessed according to state laws before it can operate as a will. If the deceased did not complete this procedure, the document will not be legally valid and the intestacy statute passed by the decedent's state of domicile will control the distribution of his property.

OBSERVATION Wills that lack the proper formalities are often drawn up without the aid of an attorney. The fact that the deceased genuinely believed that the will was valid does not make the document legally binding. There is no requirement that a will be drafted by an attorney. Indeed the will can be handwritten in pencil as long as it is properly signed and witnessed. A handwritten will - often referred to as a holographic will - that is properly witnessed is valid in all states. A handwritten will without proper witnesses is valid in only a minority of states.

The law is quite strict about legal formalities, and if a will is not properly signed and witnessed, it cannot legally operate.

Lack of Testamentary Capacity

A document that has all the legal formalities - including proper signatures by the deceased and witnesses - will still not operate as a will if the deceased lacked "testamentary capacity" at the time the will was made.

Many wills are made in the hospital. There are no special rules for these wills, but they must be properly signed and witnessed. If the individual is physically incapable of signing, he may not be able to complete the will. Most states do allow someone to help the testator sign if he is too frail to do so himself, but this obviously invites a challenge from someone who will be financially disadvantaged by the will.

A more common problem with wills made during a last illness involves testamentary capacity. Essentially, the deceased must have a sound mind when the will is made. In most states, the testator must satisfy all of the four distinct requirements that demonstrate legal capacity to make a will:

1. the testator must understand the nature and extent of his or her property;

2. the testator must recognize the "natural objects of his bounty" (i.e., he they must be able to remember family members);

3. the testator needs to understand the testamentary act; and

4. the testator must understand the relation of the first three elements to one another.

A person who is seriously ill may have diminished legal capacity and may simply be unable to make a legally valid will.

Fraud and Undue Influence

A challenger may allege that the will was not the product of the deceased's own free will, or that there was a lack of "volitional consent." The challenger will allege that the testator did not voluntarily execute the will, but was tricked or pressured into signing the document. Normally the challenger will argue that the will was a product of either fraud or undue influence.

To prove fraud, a challenger must prove that someone made a false representation to the testator with an intent to deceive him. Moreover, the testator must have relied on the deception to the detriment of the challenger. However, if the challenger can provide "clear and convincing evidence" of fraud, then the court will set the will aside.

Another and even more frequent challenge to a will is based on undue influence. Undue influence occurs when someone uses overpersuasion or coercion to overcome the testator's free will. Most undue influence cases arise when the overreaching party enjoys a confidential relationship or a relationship of trust with the testator whose illness or stress renders him vulnerable.

APPOINTMENT OF THE ADMINISTRATOR

When a person dies intestate, his property still flows into a probate estate. The estate is run by an administrator rather than an executor, but her duties are much the same and she is held to the same high fiduciary standard.

Since there is no will to appoint the administrator, the law provides a list of possible individuals. The individuals at the top of the list have first priority. A typical list includes:

• a surviving spouse

• other "heirs at law" (family members who inherit a deceased's property)

• creditors

In appointing an administrator, the probate court will attempt to appoint the relative who is the most closely related to the deceased. If none of the parties listed above will serve, the court will appoint a stranger to serve.

Bonding

The probate court may require the administrator to buy a bond with the estate's finds. This protects the interests of both the heirs at law and the creditors.

INTESTATE DISTRIBUTION SCHEME

Under every state's intestacy statute, the deceased's property will be distributed to the next of kin. In other words, because most people leave their property to close relatives, if a person dies without a will, the law will distribute her property to those most closely related by blood.

Lineal and Collateral Relatives

In most states the intestacy statute awards property to either lineal or collateral relatives. A lineal relative is a direct relation, such as a grandfather, father, son, or grandson. A collateral relative is one who shares a common ancestor with the deceased, such as brothers and sisters, cousins who have common grandparents, and uncles, aunts, nephews, and nieces. States vary as to the degree of relationship that is required to inherit under the intestacy statute. In some states, distribution will be made to parents, children, grandparents, grandchildren, great-grandchildren, uncles, aunts, nephews, and nieces, but not to cousins.

Typical Scheme

Many, but not all, states have adopted the distribution scheme promoted by the Uniform Probate Code. This distribution system sets up a nine-step procedure. In interpreting the code (see below) , issue includes the deceased's children, grandchildren, and great-grandchildren. Parents' issue includes the deceased's brothers, sisters, nephews, nieces, grandnephews, and grandnieces. Grandparents' issue includes the deceased's aunts, uncles, first cousins, and distant cousins.

The administrator needs to start at the top of the list and work down until all property is distributed.

UNIFORM PROBATE CODE

Deceased is survived by:

1. spouse and issue born to both the deceased and spouse, spouse takes first $50,000, plus ½ of remainder*; issue take ½ of remainder

2. spouse and issue born to deceased alone, spouse takes first $50,000, plus ½ of remainder*; issue takes ½ of remainder

3. spouse and parents but no issue, spouse takes first $50,000 plus ½ of remainder; parents take ½ of remainder

4. spouse only, but no issue spouse takes all

5. issue only, but no spouse, issue takes all

6. parents, but no spouse or issue, parents take all

7. parents' issue, but no spouse, issue, or parents, parents' issue take all

8. grandparents or their issue, but no spouse, issue, parents, or siblings, paternal grandparents or issue take ½, maternal grandparents or issue take ½

9. no relatives, all property "escheats" to the state

*In a community property state, the spouse would also take half of all the community property.

<?xm-replace_text {P}?>

WARNING Note that intestacy distribution rules vary from state to state.

The following examples illustrate the operation of the Uniform Probate Code rules.

EXAMPLE 1 Todd dies intestate. Todd is survived by his wife, Mary. The couple's son, Harry, predeceased Todd. Mary takes the entire estate. (See rule 4.)

EXAMPLE 2 Todd dies intestate. Todd is survived by his two sons, Peter and Paul. Mary, the boys' mother and Todd's wife, predeceased Todd. Peter and Paul will share the estate. (See rule 5.)

EXAMPLE 3 Todd dies intestate. Todd has outlived his wife Mary and his two sons, Peter and Paul, but Todd is survived by one son, Harry. Both Peter and Paul had two children each (Todd's four grandchildren). The surviving son, Harry, will share the estate with Peter's and Paul's children. In most states Harry will get one-third, and the grandchildren will each receive one-sixth of the estate. (See rule 5 above.)

EXAMPLE 4 Todd dies intestate. He died in an auto accident in which his wife Mary and only child Harry were also killed. Todd is survived by his parents, who have divorced. The parents will share his estate equally. (See rule 6 above.)

EXAMPLE 5 Todd dies intestate. He died in an auto accident in which his wife Mary and only child Harry were also killed. Todd's father died some time ago. Todd is survived by his mother and his brother Ted. His mother will take the entire estate and Ted will get nothing. (See rule 6 above.)

EXAMPLE 6 Todd dies intestate. He died in an auto accident in which his wife Mary and only child Harry were also killed. Todd's mother and father both died some time ago. Todd is survived by his brother Ted. Ted has a son, Gene (Todd's nephew). Todd also had a sister, Ann, who died a year ago. She had two daughters, Alison and Briana (Todd's nieces). In most states, the estate will be shared by his brother Ted, who will get one-half, and his nieces Alison and Briana, who will each get one-fourth. Gene, Todd's nephew, will get nothing. (See rule 7 above.)

EXAMPLE 7 Todd dies intestate. He died in an auto accident in which his wife Mary and only child Harry were also killed. Todd's mother and father died some time ago. Todd is survived by both of his maternal grandparents and his grandfather on his father's side. The grandparents will share the estate. The maternal grandparents will each get one-fourth and the grandfather on his father's side will get one-half of the estate. (See rule 8 above.)

EXAMPLE 8 Todd dies intestate. He died in an auto accident in which his wife Mary and his only child Harry were also killed. Todd's mother and father died some time ago. Todd is survived by both of his maternal grandparents and his mother's sister Doris (his aunt). Both grandparents on his father's side are dead. His father's brother Bob, however, is still living. Todd's Uncle Bob will receive one-half of the estate and the surviving grandparents will share the remaining half. Thus, the maternal grandparents will each take one-fourth. (See rule 8 above.)

State-by-State Variations

The states vary somewhat in their treatment of distributions in intestacy. For example, assume that Brown dies without a will and is not survived by his two children. He is survived by three grandchildren. The first grandchild is a daughter of Brown's oldest child and the second and third grandchildren are the children of Brown's other child. In some states, each of the grandchildren would receive a one-third share because there are simply three heirs. In other states, the first grandchild would receive one-half of the property, and the second and third grand- children would each receive one-quarter because they trace their inheritance through their deceased parent.

Per Capita and Per Stirpes Distributions

The state intestacy statute may provide that the distribution among the beneficiaries be per capita or per stirpes. Administrators should understand the distinction between per capita and per stirpes distribution as applied to intestate gifts. These terms indicate the manner in which the property will be distributed among class members in the event that one of the members of the class predeceases the deceased. Per capita merely means "per person," and per stirpes means "from the root."

EXAMPLE Assume that Smith had two sons, Peter and Paul, who each have two children. Peter's children are named Alison and Briana, and Paul's children are named Chelsea and Darren. Smith dies intestate. The closest surviving relatives are his grandchildren, because Peter and Paul predeceased him. The law provides that the grandchildren shall receive their shares per capita, but at the time of Smith's death, Darren, one of the grandchildren, has predeceased Smith. Because state law calls for per capita distribution, the property will be divided into thirds and paid to Alison, Briana, and Chelsea in equal shares. A per capita distribution divides the property equally by the number of surviving persons in the class.

Using the example above, assume that the intestacy statute provides that the grandchildren share the property per stirpes. In some states, because Darren has predeceased his grandfather, the property will be divided at the "root level," - in this example, the grandchildren's parents, Peter and Paul. Thus, the property would be divided into two parts, one for each root, and one-fourth of the proceeds would be paid to Alison, one-fourth to Briana, and one-half to Chelsea, the sole survivor of that root.

Additional complications can arise when the beneficiary is long-lived. Assume that in our example both sons, Peter and Paul, and one grandson, Darren, predecease Smith. Moreover, Darren is survived by two sons, Smith's great-grandchildren. State law, which varies, will determine exactly who is to receive Smith's property when the law dictates a per stirpes distribution. In many states the root level is determined at the first generation in which there is a survivor. In this case, since the sons have not survived, then the root level is the grandchild level. Because there are three surviving grandchildren there will be three roots. Accordingly, Alison, Briana, and Chelsea will each get a one-third share, and the great-grandchildren will get nothing.

In other states, however, the root level is determined at the level closest to the deceased, regardless of survivorship. In this case the root level would be at the parent level and there would be two roots, because Smith had two sons, Peter and Paul. Peter's children, Alison and Briana, would each get a one-fourth share, and Paul's child, Chelsea, would get one-half, and the great-grandchildren nothing. (In a few states, the result may be that Chelsea and the great-grandchildren would get one-quarter, one-eighth, and one-eighth shares respectively).

OBSERVATION Administrators must determine the law in their state and seek legal advice on structuring complex distributions to avoid personal legal liability.

Adopted and Posthumous Children

Adopted children, posthumous children (children conceived but not born before the death of the deceased), and illegitimate children are treated as any other children under the intestacy statutes in most states. However, some states have special rules for step-children and half-bloods, children who share only one common ancestor with the deceased.

Unmarried Couples

While distributing property to close relatives is appropriate for more traditional families, it can work a real hardship on unmarried couples. If one partner in an unmarried couple dies without a will, the other partner may get nothing because they are not legal relatives. It is essential that both partners in an unmarried couple have a will to prevent this.

Some states have enacted laws that protect the rights of unmarried couples who live together. At the time of this writing, these statutes usually require the partners to be of opposite sexes, although this requirement may become increasingly flexible in the future. In some states, the laws require the couple to have lived together for a specific period of time. For example, the Oregon statute requires a man and woman to have lived together for 10 years, and to have lived in Oregon for at least the last two years. Additionally, the couple must have "mutually assumed marital rights" and acquired a "general reputation of husband and wife."

OBSERVATION When an unmarried co-habitant attempts to take a spouse's share under an intestacy statute, he or she may face opposition from surviving blood relatives. For example, children from a previous marriage may allege that the unmarried couple's relationship was too casual to satisfy the requirements of the state statutes. The executors of the estates of several well-known entertainers have been embroiled in such disputes.

Escheat to State

If an individual dies without a will and leaves no close family members, the property will go to the state government. When this happens, the property is said to escheat to the state. If a person who dies intestate is the last of a family line and leaves no surviving family, then the property would automatically escheat to the state.

IDENTIFYING AND FINDING THE HEIRS AT LAW

The administrator of an intestate will has two tasks concerning heirs at law. The administrator must identify the individuals who qualify as heirs. If the administrator is familiar with the decedent's family, this may not be troublesome. On the other hand, if the family is large and does not keep in close touch, it may be more difficult. The best course may be to identify a few people in the family who seem the best-versed in family history and enlist them to help construct a family tree. The administrator then needs to show the family tree to various family members until some consensus is reached about who the family members are and how they are related.

The second step is to find the heirs at law. This may be a considerable task. Although in some families everyone lives close to one another, in other families, members are scattered not only around the country but around the globe. It may take considerable creativity and research on the part of the administrator to track down these people. If they have a fairly common name like "Robert Johnson," the task may be all the more difficult.

PLANNING TIP There are firms that specialize in finding lost heirs. Genealogists can be useful in identifying and locating lost heirs.

ADDITIONAL CONSIDERATIONS

Advancements

An heir's share of the intestate distribution will be reduced by any advancement. An advancement is a share of the estate that is received during the deceased's lifetime, and which is clearly identified as an advance payment of the recipient's inheritance.

EXAMPLE Sara has three children. Ron, the eldest son, asks Sara for $100,000 to start a business. Sara gives Ron the money but makes it clear to him that this $100,000 is an advancement from the amount he can expect to receive on her death. If Sara dies intestate, the administrator shall reduce Ron's inheritance by the $100,000. In some states, advancements must be acknowledged in writing by the heir or the deceased.

Qualifications to Inherit

There are some miscellaneous rules with which the executor needs to be familiar. In most states the right to inherit property is conditioned on the heir surviving the deceased by 120 days if there is no will. Some states have different rules.

EXAMPLE Todd dies intestate. State law provides that the right to inherit is conditioned on the heir surviving the deceased by 120 days. Todd is survived by two brothers, Peter and Paul, who are his sole heirs at law and are expected to share his estate. Peter, who has been ill for a number of years, dies 110 days after Todd. Paul will inherit all of Todd's estate None of Todd's property will flow into Peter's estate.

Similarly, the heir must be conceived at the time of the death of the intestate. For example, a grandchild who is conceived after the deceased's death would not qualify as an heir at law.

Most states provide that if there is no evidence of the order of death of two individuals, no one is presumed to have died first. This avoids circularity in intestate proceedings. For example, assume a husband and wife both die together in a car crash. The estate of the husband will pass as though the wife died first. Her estate will pass as though her husband died first. This prevents one spouse's property from passing through the other's estate.

Most states have "slayer's statutes" that prevent a person who intentionally kills another from receiving a share of the victim's estate. Similarly, state law may prevent a person who has participated in fraud or undue influence in regard to the deceased from sharing in the estate.

PLANNING TIP Although at common law an individual could not disclaim (renounce) an intestate share, most states now allow an heir to disclaim his share. This can be useful in avoiding estate tax problems.