What Happens If I Don’t Have A Will?

| February 1, 2020 | 0 Comments

I occasionally hear this question, and the answer is somewhat surprising to those who ask me: even if you do not create a Last Will and Testament, you still have one. It was written by your state legislature.

A will is basically a set of instructions that tells your heirs how to wind up your affairs after you die. This includes who gets your assets, and who you would like to take care of children or pets, etc. Because not everyone writes these instructions while they’re living, every state has laws that describe in detail what happens if you die without a will. It’s called “Intestate Succession,” and the process is managed by the probate courts. Leaving such important decisions up to a court can be very expensive and can lead to undesired outcomes.  

The most important things

The two most important factors in the estate process, at least in California, are whether you’re married and how you hold title to your assets. In California, all property acquired during marriage is considered “Community Property” that is owned equally by both spouses. Not all states recognize this concept, but for those that do, there can be serious ramifications.

Titling of property is equally important- and seemingly minor differences can have a huge impact on how your assets are passed on. For example, property titled as joint tenants, or joint tenants with right of survivorship, will pass to the survivor on the death of one of the owners.

“Tenants in common” is another way to jointly own property, but the survivor doesn’t automatically inherit the interest of the one who died.  Clearly, it’s important to pay close attention to how your assets are titled, whether or not you have a will.

What a will won’t cover

There are some things that will happen whether or not you have a will. For example, financial assets, which have designated beneficiaries like 401(k) plans, individual retirement accounts and life insurance policies pass directly to the beneficiaries without going through the probate courts.

However, if you haven’t designated any beneficiaries on the accounts, or if the beneficiaries can’t be located or identified at your passing, then these assets may have to go through the probate process to figure out what to do with them.

Dying without a will in California.

If you die without a will in California, and you are married at the time of your death, property that is determined to be community property goes 100 percent to your spouse. Non-community property, also called separate property, will pass to your heirs depending on who they are and how many of them are still living. Only if you have no living children, grandchildren, siblings or parents can your spouse inherit your separate property. If you do have heirs (parents or children), then your spouse will receive a portion of these assets and your heirs will receive the rest.  

If you’re not married at the time of your death, then your heirs will receive your assets. The order here is:

Children, if living, or the issue of your children (their children, grandchildren, etc.),

Your parents, then the issue of your parents (brothers and sisters, nieces and nephews)

Your grandparents, then the issue of your grandparents, etc.

Probate is a complex process involving courts, attorneys and strict rules. While there are statutory maximum fees that can be charged, attorneys can petition the court to waive these limits in complex cases, so probate can get very expensive, especially if each potential heir hires an attorney to fight over what’s left of your assets.

Finally, it’s important to note that a will does not eliminate probate, but it does make the process easier by giving the court guidelines on how you want things to be done. To avoid probate entirely, spend a little money and work with an estate planning specialist to create a will and a revocable living trust. The cost will be a fraction of probate and will allow you to decide how and to whom your assets are divided when you die.

This column is prepared by Rick Brooks, CFA®, CFP®. Brooks is director/investment management with Blankinship & Foster, LLC, a wealth advisory firm specializing in financial planning and investment management for people preparing for retirement. Brooks can be reached at (858) 755-5166, or by email at rbrooks@bfadvisors.com. Brooks and his family live in Mission Hills.

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