Not Just a Will, You Need an Estate Plan
When discussing wills and estate planning, every once in awhile, the question arises – what happens where there is no Will? Hopefully, this question is not addressed for the first time after the death of a loved one.
The answer could depend on whether all of your assets are non-probate, that is they are jointly titled or have beneficiary designations, or some of your assets are probate assets, that is titled in your own name without beneficiaries.
Probate assets, the ones that are only in your name and have no beneficiaries, go by Will. Non-probate assets go to the joint owner or to the beneficiary regardless what the Will says. An estate plan, as opposed to a Will, takes into account both probate and non-probate assets. An estate plan is a plan that covers all of your assets and decides where they will go when you die.
Suppose a husband and wife own all of their assets jointly. Their house is jointly titled as tenants by the entireties. Their bank and investment accounts are owned in both names. Each names the other as beneficiary of their IRA, 401(k) and life insurance. If either the husband or the wife dies, assets will go to the survivor regardless whether there is a Will.
However, even with this most basic situation, you need to consider more.
- Do you have contingent (back-up) beneficiaries? For IRA’s and life insurance, you still need to name who will inherit if both of you die in a common accident or one passes away shortly after the other. There needs to be a contingent or back-up beneficiary. When IRA’s are involved, not naming a backup individual or individuals can result in an additional tax if there is inheritance by an estate.
- Do you have a Will to cover the time when both you and your spouse have died? If spouses have titled their assets jointly and named each other as beneficiaries, on the death of the second spouse, there will be a probate estate as to the children. Someone needs to be named as Executor. Sometimes a parent wants to leave more to one child or group of children than to others. One or more of the children may have special needs such that there should be provision for a Supplemental Needs Trust. A child may die before the parent leaving minor children (grandchildren) behind. Most Wills contain provision for a Trust for Minor Beneficiaries or for beneficiaries who have not reached a given age. In the alternative, parents could limit inheritance to their surviving children without inheritance going to grandchildren.
- Are you in a second marriage? If you were married before and want to leave an inheritance to children by a prior marriage, you have to look closely at your estate plan. It is not enough to designate your current spouse as receiving half of your assets and your child as receiving half. If you jointly titled your house in your name and your later spouse’s name and named him or her as beneficiary of your life insurance and retirement accounts, you may have inadvertently disinherited your child.
Finally, without a Will, where there are probate assets titled in your name alone or as tenants in common and without beneficiary designations and not payable on death to someone else, then the State’s intestacy laws apply. The result might be what you would have intended or might not be. Here are some examples under Pennsylvania’s law without a Will.
- If Decedent dies with spouse and no living children or living parents, then everything goes to surviving spouse.
- If Decedent dies with a spouse and living parent or parents but no children, spouse takes first $30,000 of the probate estate plus ½ of the remaining estate. Parents take the rest.
- If Decedent dies with spouse and children and the children are also children of the spouse, then spouse is entitled to $30,000 and ½ of the probate estate. Children divide the remainder equally. If spouse is not the parent of the children, then spouse receives ½ of the estate.
- If decedent dies with parents and no children or spouse, then surviving parents share equally.
- If decedent dies with children and no spouse, the children take all equally in the same generation.
- If decedent dies with no spouse, children, or parents, then decedent’s brothers, sisters, or their children take all.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.