The next estate planning myth I want to address is the belief that, if you die without a will in place, the state will get your money. Idaho (as with all states) has a series of laws that control who gets what in the event you die without a will, called the laws of “intestate succession.”These laws govern what happens to your “estate,” the legal term for a part of what you owned when you died.
Not everything that you owned becomes a part of your estate. Typically, life insurance proceeds and retirement accounts have beneficiaries designated to receive the money upon your death. Sometimes, real estate and bank account might have similar devices to transfer ownership automatically upon your death. These sorts of assets and not part of your estate and will be strictly distributed (for better or for worse) in accordance with your instructions. (So if your ex-husband is listed as the beneficiary on your 401(k), he gets the money on your death.)
Anything that is leftover (your personal and household effects, your car, your bank accounts, etc.) becomes your “estate” and will be distributed in accordance with your will, or Idaho law if you had no will. Without a will, here’s what happens:
- Your spouse (if you have one) gets all of the community property and half of your separate property, if any. (Community and separate property is an issue for another blog.)
- If there is anything left over after step one (for example, you aren’t married), it gets divided in some fashion over your descendants (kids, grandkids).
- If you have no living descendants, anything left over from step one goes to your parents in equal shares.
- If you have no living parents, anything left over from step one goes to your living siblings or to their descendants (your nieces and nephews).
- If you have no living siblings, nieces, or nephews, the step one left-overs go to your living grandparents, or aunts and uncles, or cousins, using a complicated formula.
- If you have no surviving spouse, kids, grandkids, parents, grandparents, brothers, sisters, nieces, nephews, grandparents, aunts, uncles, or cousins, then your estate becomes property of the great State of Idaho.
So, while it is possible that the State could get your money, it just doesn’t happen that often. What happens much more frequently is that someone you would like to inherit gets left out, or someone you do not want to inherit gets a share. The simple way to avoid all of this, of course, is to prepare a will. Better yet, you can get a comprehensive estate plan to help you deal with all of your property, not to mention guardianship of your kids and all the other issues that get addressed as part of the estate planning process.