What Happens When a Person Dies Without a Will or Trust?
There are three legal situations that you may find yourself in when a loved one dies. It all depends on the type of planning they did. For the purposes of this article, we will call the loved one that has passed the “Decedent.”
First: The Decedent dies without doing any estate planning (without a will or trust).
Second: The Decedent dies with only a Will in place.
Third: The Decedent dies with a Will and a Living Trust in place.
This article focuses solely on what happens when your loved one dies without having done any estate planning.
If the Decedent died without a Will in place and they had considerable assets (over $150,000) then their estate will go through an administrative process known as “probate.” The Decedent is considered to have died “intestate” which simply means without a Will. The laws of intestate succession will be used by the California Superior Court system to determine who will inherit the estate. The Court will appoint an administrator and the Decedent’s assets will be distributed according to state law. So, if your loved one did not create a Will, the state does it for them.
How Much Does Probate Cost?
The probate process is extremely costly. Attorney fees are statutory and based on the value of the estate. This means that they are set by statute and cannot be negotiated. Further, the value of the estate is not determined with liabilities in mind. For example, if the Decedent owned a home valued at $600,000 with a mortgage of $400,000, for fee purposes, the mortgage is ignored. Her attorney fees alone will run somewhere around $15,000. This does not include the court filing fees, publication, bond, and other related costs associated with probating an estate which can run in the thousands. Here is a breakdown of attorney’s fees based on the value of the estate:
4% on the first $100,000
3% on the next $100,000
2% on the next $800,000
1% on the next $9,000,000
In addition to being costly, the process is very lengthy and public. All of the information regarding your loved one’s estate will be accessible by anyone.
Determining who inherits the estate depends on a series of questions. First and foremost, was the Decedent married?
Decedent Was Not Married
If the Decedent was NOT married, the estate will be split equally between the person’s children, if any. If the Decedent had no children or issue (grandchildren, great-grandchildren, etc.) living, the estate will be distributed to the Decedent’s parents. Provided that there are no parents, the estate will be distributed among the Decedent’s siblings. If there are no siblings, then between nieces and nephews, and so forth and so on.
Decedent Was Married
If the Decedent was married, then we have to determine if the asset was community property, separate property, or a combination of both.
Let’s take a moment to define each of these types of assets.
Community Property is generally defined as assets that is acquired during marriage from earnings or salary.
Separate Property is generally defined as assets (1) brought into the marriage when the person got married, (2) an inheritance or (3) gifts. Of course, classification for certain assets can change throughout the marriage.
The Decedent’s community property goes to the surviving spouse. Now, if all that was owned was community property, we can easily transfer this asset to the surviving spouse through what is called a “Spousal Property Petition” rather than a full blown probate.
Separate property of the Decedent will be distributed based on who they have left behind.
If for example, the Decedent is survived by a husband and three children, then the husband will receive 1/3 of the separate property and the other 2/3 will be divided between the three children.
For example, the Decedent is survived by a husband and mother (no children), then the husband will receive ½ of the separate property and mother will receive the other ½.
There are a variety of outcomes with Probate depending on who survived the Decedent and the types of assets owned by the Decedent. The state takes charge and determines who will receive your assets, even if that means your sister that you have been estranged from for the past 15 years. The outcome would be different if the Decedent had a Will or Living Trust in place.