What Happens When You Die…Without an Estate Plan?
What Happens After You Die…
Without a Plan?
Jill has two children one of which she hasn’t spoken to in 20 years and the other of which takes care of her.
At Jill’s funeral, the estranged daughter shows up and demands her piece of mom’s estate.
Because Jill didn’t have a plan in place, Jill’s estranged daughter is going to get half of everything. Even a basic Will would have made sure the estranged daughter didn’t get anything.
If You Don’t Plan You are Giving Control to the State
The State will decide who gets what, when, how, and how much if you don’t have your own plan.
In the case of Prince, the popular musical artist, Minnesota decided who received his estate. Since he didn’t have even a Will, his sister and half-siblings will take the estate. A Judge made the decisions, not Prince. The outcome would have most likely had been the same in Arkansas.
When you die without a plan in place, the State of Arkansas has written one for you. The State takes control. The State will control what you had and who gets what, when, how, and how much.
All the property you own in your name alone will be subject to “intestate succession.” Most people call this probate. Intestate, or Intestacy, is what happens to an estate in the case an individual dies without creating a Last Will and Testament.
Property (money, land, and more) you own in your name alone is called your probate property or your probate estate. This is the property subject to intestate success (probate).
Assets owned jointly or that have a designated beneficiary (like retirement accounts and life insurance policies) are non-probate assets. They go directly to the co-owner or beneficiary and are not subject to probate or distribution under the laws of intestate succession.
Depending on how real estate is titled, real estate in your name may transfer automatically and it may not.
So, instead of you getting to decide who is in charge and who gets what, when, how, and how much, the State Government through the Courts decides that for your probate estate.
Who Gets Your Stuff?
Your spouse, surviving children, and any children of your deceased children will inherit your estate. If you don’t have children, it gets really complex as to who gets your stuff. It depends on if you were married, and how long you were married.
Who Will Care for and Raise Your Children?
If you have children under the age of 18, then the Court will manage their money until they are 18 years old (or sometimes 21), then write them a check for the full amount. What are the odds they will save and invest a large lump sum at 18 years old?
The Court will also decide who raises your children without your input.
Life Partners
If you are not married, but have a long-term partner, the results can be devastating. Under the law of Arkansas, your long-term partner will not inherit anything.
Intestate Succession Process and Cost
Intestate succession will take 8 to 12 months if everybody gets along.
Intestate succession will cost about 6% of your GROSS estate. Your gross estate is the value of everything you own WITHOUT subtracting out debts. If your house is worth $200,000.00 with a $100,000 mortgage, your gross estate would be $200,000.
Creditors MUST be paid before your family gets anything.
Final expenses MUST be paid before your family gets anything.
But the financial cost isn’t the only cost. Your family will have to wait until towards the end of the process to get their money and expenses.
High Level Overview of Intestate Succession
IF everybody has signed waivers, then the process can be done in as little as 8 to 9 months. If even one person doesn’t sign, then the process can stretch out over years. Until it reaches the distribution step, nobody gets anything.
The overview is long. My detailed checklist has over 115 boxes to check off during the process.
Here is a high-level overview of the process:
- Get everybody involved to sign waivers
- Sign and file a petition to open administration and the waivers
- Pay the filing fee (additional cost)
- Send an order to the Judge to open administration
- Once the order is signed, get the Administrator (if there had been a Will, then this would be an Executor…) to sign an acceptance
- File the acceptance and get “Letters of Administration”
- Place a notice (at additional cost) in the newspaper which starts the 6-month windows for creditors to make claims
- During the 6-month window
- Appraise assets as required by law and the Judge
- Sell real estate and other property
- Administrator signs a petition
- Petition is filed
- Order is sent to Judge
- Judge signs or calls a hearing
- Negotiate with creditors
- Continue to pay bills due like mortgage payments if the family decides to keep the house
- Sit on the money until the 6-months ends
- Pay creditors
- Administrator signs a petition
- Petition is filed
- Order is sent to Judge
- Judge Signs or calls a hearing
- Pay the attorney and Administrator
- Administrator signs a petition
- Petition is filed
- Order is sent to Judge
- Judge Signs or calls a hearing
- Pay last expenses like funeral and medical bills
- Administrator signs a petition
- Petition is filed
- Order is sent to Judge
- Judge Signs or calls a hearing
- Distribute what’s left
- Administrator signs a petition
- Petition is filed
- Order is sent to Judge
- Judge Signs or calls a hearing
- File receipts from the distribution
- File a Report of Distribution
- Get the Report Approved
- Administrator signs a petition
- Petition is filed
- Order is sent to Judge
- Judge Signs or calls a hearing
- Case Closed
If the Judge decides a hearing is needed (or somebody didn’t sign the waiver of appearance), then 20 days is added, minimum, for notice of the hearing.
How to Avoid Intestate Succession
You can write a simple Will to avoid intestate succession. However, this leads to regular Probate. A Will REQUIRES probate to be validated and used to distribute your property. The checklist is almost the same as above, only your Will controls some of the process, not the Judge.
You can create a COMPREHENSIVE ESTATE PLAN that avoids as much probate and intestate succession as possible. A comprehensive estate plan will keep your major property and money out of probate. Not only does your family get the money and property immediately, but unsecured creditors also can’t make a claim against this money and property. And if done correctly, your residence will be protected from Medicaid recovery.
A COMPREHENSIVE ESTATE PLAN not only avoids probate but also protects you and your family during your lifetime.
Want to Know More?
Give us a call at (479)717-6300 to setup a time to come in and chat with us about this and more.
We would love to meet you and chat about planning and how it protects you and your family.
During your estate planning success meeting we’ll talk about your goals, family, finances and more to come up with the plan that fits you the best and gives you the best chance of success. You’ll leave knowing the plan that gives you the peace of mind you deserve. And you’ll know exactly what the fee will be, no surprises at the end. You can also go to https://www.dewitt.law/schedule-appointment and pick a day and time that works for you.