What Happens to My Stuff If I Die Without an Estate Plan?

At some point in life, everyone asks, “What happens to my stuff if I die without an estate plan?” And actually, it’s a trick question. Because everyone has an estate plan. It just might not be one that you intend.

You already have an estate plan (even if you don’t know what it is).

No matter if you plan or not, someone is going to get your money and property after you die. Someone is going to take care of your minor children. Someone will be instilling values and philosophies in your children and grandchildren after you are gone. And someone will be telling your children how to use their inheritance.

The real questions are:

  • Who is going to get what?
  • Who will take care of your minor children?
  • Will your loved ones remember and pass on your family’s mission, values and philosophies? (Compared to the values and philosophies they learn from social media and movies.)
  • Will your children and grandchildren be prepared to inherit (so that their inheritance is a force for good in their lives)?

Most people do not plan ahead. They prefer to gamble with their loved ones. Yes, I mean “gamble.” You see, 70% of wealth transitions to the next generation do not work. In those cases, the children either squander their inheritances, or they lose motivation to be productive, or they become alcoholics or drug addicts, or they just party and enjoy life until the money runs out. We have found little correlation between whether a parent has a basic, typical estate plan and whether the heirs are responsible with their inheritance.

So, the question is this: What happens if you die without an estate plan to specify:

  • who should get what,
  • who will take care of your minor children,
  • what family mission, values and philosophies you want to pass on, and
  • what should be done to prepare your children and grandchildren to inherit (so that their inheritance is a force for good in their lives)?

Even if you are more proactive than most and have documented your wishes, it’s important that you know what the default rules are so that you know what you need to plan around.

You probably have done some estate planning

The only assets that will be subject to court supervision are those that are in your personal name and for which you have not designated a beneficiary. For example, if you own a house that is titled to you and your spouse as ‘joint tenants’, and you die, your spouse is going to get the house. Or if you have a bank account with a “pay on death” feature, the person that you named on the beneficiary designation form will receive that account.

In fact, the titling of your assets and your beneficiary designations will control how your assets are distributed even if you have a will and that will has different instructions. If, for example, you designated your mother as your 401(k) beneficiary 10 years ago, but have since gotten married, had kids, and drafted a will saying that your spouse or kids should get your 401(k), that 401(k) is still going to go to your mother.

Co-titling your assets and completing your beneficiary designation forms can be a quick, easy, and cheap way to plan your estate. But it may not work if part of your plan includes assumptions about what someone will do when you are no longer around. For example, if you name your oldest child as the beneficiary of your investments with the assumption that she will be “fair” and divide things amongst your other children, that may not happen when (a) you are no longer around to keep your child honest, and (b) the child suddenly has a bunch of money in her account.

Also, failing to keep your beneficiary designations up to date can be disastrous. Keeping those forms up to date is crucial even if you do have a well-designed estate plan in place because those forms are going to take priority over any other instructions that you may leave behind.

Dying Intestate

What if you die without an estate plan, owning assets in your name alone, and those assets do not have a beneficiary designation form? These assets will be given out according to your state’s intestacy laws. In Arizona, the statutes include formulas. For example, if you were married and your children are all from that marriage, your spouse gets everything. (In which case, your spouse could later remarry and write a will giving everything to Spouse #2 if your spouse dies … thereby disinheriting your kids.) If you are in a second marriage and your children are partly from a previous relationship, then your current spouse gets a portion and your children get a portion. (And if your kids are under age 18, then there will need to be a court-appointed conservator to hold each child’s assets until that child turns 18. And how responsible do you think your 18-year-old children will be?!?)

If you are single with kids, then your kids are going to split your assets equally. (Again, if your kids are under age 18, then there will need to be a court-appointed conservator to hold each child’s assets until that child turns 18.)

If you have no spouse and no kids, then your parents, brothers and sisters, nieces and nephews, or the kids of your nieces of nephews are going to receive your assets, depending on who survives you. If no one fitting any of those descriptions is available to receive your assets, then your assets will be transferred to your grandparents, aunts and uncles, cousins, or children of your cousins, again depending on who survives you. If, by this point, there still isn’t anyone available to receive your assets, then your assets will be transferred to the state. These default rules aren’t necessarily terrible. The reason that they’re the default rules is because your state legislature thinks that they are the closest approximation of what the average person would probably want.

woman at laptop thinking

Most people, however, would probably tweak these distributions at least a little. You may, for instance, want your brothers and sisters to receive your assets before your parents. Or you may want to disinherit a child. Or you may want to give at least some of your estate to a charity or a friend before getting all the way out to your cousins’ kids. And you most likely do not deliberately want to leave your assets to the state. If all you want to do is make some modifications around the edges of these default rules, it won’t necessarily be a difficult or expensive process, even with professional help, and you should look into it. This is especially true if you have people who are financially dependent on you and would need access to your assets immediately after your death.

Think of the children

If you have minor children, you must have a will, regardless of how few assets you have. A will is the only way for you to leave instructions about who should take care of your kids if you and their other parent become incapacitated or die. If you die without an estate plan, a probate judge is going to have to select a person to raise your children. Now, a probate judge is supposed to make this appointment “in the best interest of the child.” But even with the best of intentions, how likely is it that a probate judge who never met you is going to select the same person for this crucial task as you would? In the event that you leave assets to minor children but don’t identify a person who should serve as their financial conservator, a court is also going have to make that appointment.

How to pass on your family mission, values and philosophies to your heirs.

This is where our law firm really shines. You see, most estate plan providers don’t have a clue how to pass on your family’s mission, values and philosophies to the next generation. It’s just not something that is taught in law school. But we know how. Founding Attorney Paul Deloughery is a Certified Family Wealth Advisor. In other words, he has had the same training that people who work with $100 million and $1 billion families to help them remain successful for multiple generations.

Studies have shown that children who are familiar with their family’s mission, values and philosophy are significantly more responsible with their inheritance. And the children who also know stories that exemplify the mission, values and philosophy are even more prepared to inherit significant wealth. Those families tend to be among the 30% of instances when heirs are responsible with their inheritances.

Does your estate plan include a way of passing your family’s mission, values and philosophy to the next generations?

How to prepare your children and grandchildren to inherit (so that their inheritance is a force for good in their lives).

Here’s a story to help you understand what this is all about. Imagine you want to get some eggs from the grocery store. So, you drive to the store and pay for a carton of eggs. The cashier puts the eggs in a flimsy plastic bag. You take the flimsy plastic bag to the car and drive home. You park the car. Then just as you enter the door to your house, the flimsy plastic bag breaks and all the eggs crack.

That is considered a success to estate planners.

After all, you kept the eggs all the way until you crossed the threshold to the house, and you got the eggs home. What more could you want? (We are being facetious.)

Of course, you wanted to actually use the eggs. And, of course, you actually want your heirs to be able to use their inheritance to make their lives better. But the fact remains that most estate planners would consider this a job well done. As long as your wealth gets to the next generation while (a) avoiding probate and (b) minimizing taxes, they don’t care how the wealth is squandered by your heirs.

This is part of the reason that 70% of wealth transfers fail (regardless of whether there is a typical estate plan).

An estate plan can help prepare your heirs. But it requires including language that is not typically included in most software used by estate planning attorneys or other document preparers. If you want to learn more, get in touch here. [LINK TO THE START HERE PAGE]

Summary of What Happens to Your Stuff If You Die Without an Estate Plan.

Although there are well-established rules and procedures for determining who will get your stuff and your kids after you die without an estate plan, that process can still be time consuming, expensive, confusing, and unlikely to end in the way that you would have wanted. If you have significant assets, it’s even more important that you do it correctly. And if you have kids, properly executing a well-designed plan is a must.

We believe the world will be a better place if kids are not turned into lazy trust fund babies. It would also be a better place if more families stuck together and were proud about their identities. We understand what it’s like to want the best for your kids, while also feeling frustrated that they perhaps don’t share your drive and work ethic.

That is why founding attorney Paul Deloughery, who has been an attorney since 1998, became a Certified Family Wealth Advisor. It is also why he founded Sudden Wealth Protection Law.

Here’s how we do it:

You Schedule your
Strategy Session

You will get a
detailed plan

You can sleep at night knowing that family is set up for long-term success

So click on Book a Call with an Attorney. And in the meantime, learn more about Sudden Wealth and how it impacted founding attorney Paul Deloughery, so you can avoid having your kids squander their inheritance and instead set your family up for long-term, multi-generational success.