What Does Intestacy Mean?
If someone you love has died without a will, you may have heard the legal term “intestacy”. It sounds weird, but it’s just a word used to describe someone’s estate when they’ve not created an official will before their death. It has certain legal implications for all the assets that would have been passed on by your will; basically, the state takes ownership and decides how and to whom your assets will be given.
(Related: What Happens If I Die Without A Will?)
Okay, so now you’ve got the basic definition.
But what does intestacy mean for your estate and your family, practically speaking? Well, put simply, it means that if you were to die today without an official will, your estate would be handled by the default rules of the state you live in and not by your own personal wishes.
Each state’s default intestacy rules are a little different; here are Virginia’s specifically:
Intestacy Rules in Virginia:
Virginia courts will choose a Personal Representative for your estate:
Somebody has to be in charge of gathering the deceased person’s estate and distributing it in compliance with intestacy rules. Similar to an Executor of a will, a Personal Representative takes care of collecting assets and paying expenses and debts. Virginia law offers the role of a Personal Representative to family members first, but if no one steps up within a certain period of time, creditors get the opportunity.
A judge will decide how your estate is distributed:
If you have a family:
If you have any family, the state will distribute your finances and estate to them in order of closeness. It goes like this – everything will go to your surviving spouse unless you have children (or their descendants). In that case, ⅓ of your estate goes to your spouse, while the remaining ⅔ is divided between your descendants. If you don’t have a surviving spouse or children, the state moves next to your parents, and if your parents are deceased, your estate is divided between your siblings. If you’ve no siblings, your assets will then be given to aunts, uncles, and their children.
If you have no family:
If you have no living relatives when you pass away, your property will go to the state. This doesn’t happen very often, because the laws are designed to get your assets to anyone who is related to you, and it’s rare for someone to pass away without a single relative, however distant they may be.
Problems with Intestacy
The state has to have a system for people who die with no will, but passing away intestate is definitely not the best-case scenario for most people. A number of big issues can arise with intestacy, that most people would like to avoid for themselves and their family’s sake:
Your property can go to the wrong person.
The biggest problem with intestacy is that your property can go to the wrong person. We’ve seen it happen on many occasions: money going to estranged parents instead of a beloved fiance, to an estranged child instead of children who provided care and support during your final days, or to cousins you’ve never met instead of a close friend.
Ms. Burns was a dear old lady who agreed to allow her adult son to come live with her. He hadn’t had a job in years, and so her stipulation was that she would provide and pay for his living expenses, but the money she spent for him during her life would be his inheritance. However, as she mentally declined, Ms. Burns’s son began stealing from her. Social services eventually caught on and began prosecuting him for theft, but the situation worsened when Ms. Burns finally did pass away without a will. Her estate went through the intestacy process, and because it was bound to Virginia’s default rules, her remaining assets were divided evenly between her daughter, her granddaughter, and the very son who had been stealing from her. He ended up getting a double inheritance after having taken advantage of her, because she didn’t have a legally binding plan in place for her estate, and there was nothing anyone could do about it.
The wrong person can be put in charge of distributing your property.
If you don’t plan your estate, a judge will decide who should be the executor of your will, and it’s not always a pretty sight, as one family we helped found out the hard way:
Ms. Fischer had five children and had indicated that she wanted her assets distributed evenly amongst them at the time of her death. But then she got sick. As she was lying in the hospital on a morphine drip, her youngest son came in and either convinced her to sign or forged her signature on documents indicating the majority of her assets would go to him. When she passed away, her estate went to intestacy and, unfortunately, the judge appointed this son as the executor of her will. So on top of stealing her assets, he then had complete control over everything she owned. It took over $100,000 and several years worth of lawsuits to take away his executive power, and when one of his siblings finally was appointed in his place, they then had the unpleasant job of trying to get back from him all the money he’d taken. It was a long, heart-wrenching process that cost everyone time and money, and could have been avoided from the beginning with proper estate planning.
Other practical issues:
Disputes:
Family disputes are much more common under the default rules of intestacy because the deceased hasn’t crafted a will to avoid them.
Bond:
the personal representative always has to post a bond for an intestate account. This can add hundreds to thousands of dollars to the amount owed.
Difficult to sell real estate:
The Personal Representative of an intestate estate must obtain court permission before selling real estate (land) that the deceased owned. This often results in the property being conveyed to 2, 3, 4 or more people, all of whom may have very different ideas about what to do with the property, which often results in litigation.
Funeral Arrangements:
Funerals may be delayed if there is not an agreement between all the relatives about how to handle it.
Business problems:
Businesses can struggle and sink during the probate process, and that almost happened to one estate we dealt with:
A local man who owned three restaurants in the area passed away very suddenly and without a will. He had three children and a spouse, but his wife was not the mother of his children, and they didn’t get off to a good start when it came to distributing his estate. Each of his family members thought his businesses were worth more than they actually were, and they immediately began fighting about what should be done with them. His wife was appointed as his estate’s administrator but had to be replaced by an attorney because it came out that she was stealing money from his restaurants to be used for herself. In the meantime, the restaurants almost went bankrupt, because no one was managing them in his place. It’s very common for businesses to either flounder or completely die if the owner passes away without a will. Estate planning is hugely important for business owners, not just so they can determine who will get their stuff, but also to appoint someone to carry on and run their business after they’re gone.
Minor Children’s Care:
The decision about who will take care of minor children is ultimately left up to a judge, and until the judge makes a custody decision, their day-to-day care will be handled by the Department of Social Services. If the judge decides no one close to the child is fit to care for them, the child will end up in foster care.
As you can see, passing away intestate is not the ideal situation for most people. In order to guarantee your money goes where you want it to, your family is protected, and you avoid all the issues intestacy can cause, take time to plan your estate. Click here to request your free consultation, and start taking the necessary steps to protect your future.