Someone who dies (the “decedent”) with a legal will is known to have a testate inheritance. As such, their assets are distributed according to their will. A person who dies without a legitimate will has an intestate estate. Their assets are distributed according to the laws of inheritance.
Yahoo’s recent article, “What Happens If I Die Without a Valid Will?” says that estate planning is a local area of the law, so specific rules governing estate planning vary greatly from state to state.
When you die, all of your property is called your estate. If you die with a valid and enforceable will, then your estate is distributed in the following way:
- First, all attorney’s fees related to managing your estate are set aside for payment;
- The person managing your estate (the executor) then pays any debts that you had with the assets in your estate;
- Finally, after paying off all debts, your estate is distributed according to the instructions in your will.
Liabilities don’t transfer through an estate, so while you can inherit someone’s property, you can’t inherit their debts. However, debts can affect an inheritance in several ways. The first case is when liabilities transfer with the property. Therefore, if the decedent owed unpaid property taxes or a mortgage on their house and then left you that property if you wanted the house, you’d also have to take responsibility for paying those debts. If you don’t, the executor will sell the house, settle the debts and transfer any remaining money to you.
Second, liabilities can reduce a potential inheritance. Here, if someone leaves you $100,000 in their will but also has $40,000 in unpaid debts, you’d only get $60,000 because that’s what would be left. If the debts exceed the estate’s value, the individual dies insolvent, and their heirs would get nothing.
Other than managing liabilities like debt and taxes, a person can use their will to distribute their assets in almost any way they want. It’s important to understand this because many think family members automatically have a right to inherit money or property. This isn’t so.
Reference: Yahoo (Jan. 27, 2023) “What Happens If I Die Without a Valid Will?”