Wills and Inheritance
Wills are an important means of assuring that a deceased person's property, or estate, will pass to his or her intended recipients. In addition to distributing property, a will is also useful for leaving a public record of ownership of real estate, for appointing guardians of the deceased's minor children, and for designating a personal representative, or executor, to administer the management of the estate until the deceased's debts, taxes, and administrative expenses have been paid and the remaining property has been distributed to the appropriate parties. A person who leaves a valid will is said to die "testate." To the extent that a person dies without a valid will that effectively disposes of all the property owned at death, the person dies "intestate," and the law will determine the deceased's heirs for the purpose of distributing property.
In general, the laws of the state where the deceased lived at the time of death will govern disposition of personal property, although the state where real estate is located controls distribution of that property. Absent a will, state law also will govern the selection of a guardian for minor children and a personal representative of the intestate's estate. Both will and intestacy proceedings are supervised by a court in an administrative process known as probate; the tax consequences of testacy and intestacy are the same.
Although the intestacy statutes vary considerably among the states, there are some common features. In all states, a surviving spouse is an heir, and is entitled to a portion of the estate. If the deceased left children or other descendants, whether biological or adopted, in almost all states those descendants will share with the surviving spouse, or will take the entire estate if the deceased did not leave a surviving spouse. A number of states allocate the entire estate to the surviving spouse if the deceased did not leave surviving descendants, while others require the spouse to share the estate with the deceased's surviving parents and sometimes with the deceased's brothers and sisters and their descendants. When a person leaves no surviving spouse or descendants, the deceased's ancestors and their surviving relatives are designated as heirs. Relatives more closely related to the deceased are generally preferred to those who are more distant. In many states, heirship extends no further than the level of the deceased's grandparents and their descendants; if there are no relatives within those categories, the property is said to "escheat," or pass to the state.
The primary purpose of a will is to alter the intestate distribution of the deceased's property and allow the deceased, or testator, to designate who will take the estate. Through a will, a testator may leave gifts to charities or organizations and individuals (although not to animals), and is not limited to family members. Most states require that a testator be at least eighteen years old and of "sound mind." A will may be challenged, or contested, by those who would benefit if the will were invalid because of the testator's lack of mental capacity, fraud, influence by another party, or other circumstance indicating that the document does not represent the testator's true intentions.
Usually wills must be written and properly witnessed by at least two people, according to the individual state's formalities. While all states recognize properly executed formal wills, about half the states also allow "holographic wills," which require no witnesses but must be written entirely or in substantial part in the testator's own handwriting. Because the requirements for holographic wills also vary from one state to another, they pose risks that the handwritten will may be invalid.
Although a properly executed will is a valid legal document, it does not transfer any assets until the testator dies. If an intended recipient predeceases the testator, that gift will fail unless the state has a statute that preserves the gift for designated substitutes. Similarly, if the testator identified specific items of property to be given to a recipient, the gift generally fails if the testator no longer owned that asset at the time of death.
While a testator may change or revoke a will until death, including amendments made by "codicil," or a partial revision of a will, each change or revocation must be done in a manner that satisfies the statutory formalities. A will may be revoked by physical act as well as a subsequent formal writing, such as a later will, but burnings, mutilations, and other physical acts upon the will must be accompanied by an intention to revoke; otherwise, the will remains legally valid despite its physical destruction. Furthermore, certain changes in circumstances will result in all or a portion of a will being implicitly revoked. Most commonly, divorce revokes a gift to a former spouse.
The laws of most states protect certain family members from disinheritance. Usually these protections apply exclusively to a surviving spouse, but some cover the deceased's children as well. The vast majority of states designate a spousal "elective share" that guarantees a surviving spouse a specified fraction, typically one-third, of the deceased spouse's estate. A spouse who is given less than that share may elect to take the statutory portion, after which the remaining property is distributed to the other will recipients. Furthermore, if the testator's will was drafted prior to marriage to the surviving spouse, the omitted spouse may be entitled to a portion of the deceased's estate. Although a person is not required to leave children or other descendants anything if children are not specifically mentioned in the will, they may be regarded as unintentionally omitted and entitled to a statutory share. In many states, however, omitted children are not protected unless the last will was executed prior to the child's birth or adoption.
In order to avoid probate, which can be time-consuming and expensive, a person may transfer interests in property during life, while retaining considerable control over and benefit from the property. Such transactions are commonly regarded as "will substitutes," which frequently do not require the same degree of formality as a will but achieve a comparable result. Will substitutes include life insurance policies; payable-on-death designations in documents such as contracts, stock certificates, and bank accounts; joint tenancies with right of survivorship; and living trusts. While these types of instruments usually avoid probate, they typically do not result in tax savings and are frequently ineffective in avoiding a surviving spouse's elective share.
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SHERYL SCHEIBLE WOLF