Many people think that their closest relatives will only inherit what is specified in a will. However, inheritance laws are much more complex and come with some unexpected consequences. It is important to know what will happen whether there is a will in place or not.
Dying Without A Will For those who do not create a will, the remaining estate is divided between the next of kin according to state rules. In most cases, the surviving spouse and children have the right to the property. If there is no surviving spouse or children, grandchildren or parents are the next to receive property. If this is not applicable, siblings, aunts, uncles and cousins become the heirs.
Community Property Rules When it comes to spousal property rights, the law can be complex. People who are unsure if they live in community property states should contact an agent to be sure. In community property states, any property bought or earned during a marriage is considered community or joint property. Any property that was purchased prior to the marriage or afterward is not included. When property is considered community property, each spouse owns 50 percent of it. A person may designate half of his or her property interest in a will to a beneficiary. However, the surviving spouse retains half ownership of the property as well. A special agreement signed by both spouses that agreeably designates a specific beneficiary may supersede community property laws.
Spousal Right Of Election There are laws in most states without community property laws that prevent complete spousal disinheritance. This means that a spouse has a right to one-third of the other spouse’s estate at the time of death of that spouse. The rule holds true even if the will states otherwise. In some states, this rule may depend on the length of the marriage. A surviving spouse must file a petition in court to obtain the property. If the surviving spouse fails to do this, the will is carried out as specified in the document.
Updating Wills Following A Divorce When two people divorce, it is important for both parties to update their wills. In some states, ex-spouses may still inherit certain assets if the will is not updated. However, some states have laws stating that ex-spouses no longer have the right to inherit certain assets after a divorce. Discuss this issue with an agent to determine individual state laws.
Rights Of Children A will leaves no right of election for children. When a parent disinherits his or her child in writing, the only choice left is to contest the will. However, most states have provisions for children who are born after the creation of a will. This means that the total amount will be divided among all living children. For example, consider a woman who creates a will when she has two daughters. She specifies that each one should receive 50 percent of her assets. The woman forgets to update the will after the birth of her third daughter and dies before she has a chance to update it. After the woman dies, each of her children would receive an equal 33 percent of her assets. The same idea is applicable for grandchildren when they are included in a will. I
nheritance Taxes Inheritance tax is an issue whether the assets are transferred through succession, a will or right of election. Any assets totaling over $5.43 million that go through probate are subject to federal taxes. Some states have their own estate taxes, and some states do not have any estate tax at all. Since inheritance laws are complex, it is crucial to understand state and federal laws when creating an estate plan and drafting a will.
By carefully planning who to include in the will and what to leave to each person, it is easier to avoid conflicts among survivors. Careful planning also means that assets are left to the right parties and do not fall into the wrong hands. To learn more, discuss concerns with an agent.