The LAW OFFICE of CLARK A. REMINGTON

Probate and Non-Probate Estates

Some of your property (in many cases, quite a bit of it) can pass to others upon your death even if you don't have a will. Property held jointly with others will pass to them whether or not you have a will. Bank accounts, brokerage accounts, mutual fund accounts, IRAs (or other tax-deferred accounts, such as 401(k)s), pensions, and annuities can be made to pass to others by designating them "payment on death" or "transfer on death" accounts and designating beneficiaries. If beneficiaries are named, life insurance policies may also result in payments to others whether or not you have a will. All of these assets are said to be part of your "non-probate estate," which means that they pass to your designees whether or not you have a will. They are not part of your "probate estate," that is, they are not part of the estate that is governed by the probate process.

Property that is not held jointly, not designated transfer on death, and even non-probate assets if no beneficiary is named (or if the named beneficiary is your estate) becomes part of your probate estate. If you die without a will (the legal term for this is to die "intestate") your probate property will be transferred according to the law of intestate succession, which differs from state to state. That law is complicated, but here is a sketch of how it works generally, with some links to examples of some simple situations.

Some Examples of Intestate Succession

The law of intestate succession provides for the distribution of probate property to family members of the deceased. The rules cover every possible combination of surviving family members, beginning with cases involving surviving spouse or descendant or parent or sibling. In cases where there are no close relatives surviving, the rules provide for more and more distant relations to be the recipients of the deceased's property. For some simple examples of how this works under Indiana law, see Indiana Examples. For Illinois law, see Illinois Examples.

These examples give you some sense for the kind of rules that apply when someone dies without a will. The rules of the state of your legal residence apply to the distribution of your personal property and any real property located within the state. If you own real property in a state other than that of your legal residence, the matter becomes more complicated. It is the law of intestate succession of the state in which real property is located that determines how that property is distributed. This could result, for example, in your out-of-state property being distributed to your heirs in different proportions (and even to different heirs) compared to the distribution of your in-state property. Having a will can take care of this, as a will is likely to be followed, not only by the law of the state in which you reside, but also by the law of the state in which your property is located except in rare circumstances. If you die owning real property in another state, however, whether or not you have a will, probate proceedings are very likely to be required in that other state (in addition to any proceedings required by your state of residence). One way to avoid this is by creating a revocable trust and transferring the property to it. (See Why Might You Want a Revocable Trust?.)

Naming a Guardian for Your Minor Children

If you have minor children who are made parentless by your death (that is, if you are a single parent or if you and your spouse die at the same time) then a judge will determine who will become the guardian or guardians of your children. If you want to have a voice in that process, you can do so by naming a guardian in your will.

Other Reasons to Have a Will

In a will you can designate someone you trust to be the personal representative (or executor) of your estate. If you don't have a will, there may be conflict among family members about who should administer your estate. Any such conflict would have to be resolved by a judge. With a will you can also spell out your preference for the level of court supervision over the administration of the estate. As a rule, more court involvement will mean higher legal fees. (For more detail on this, see Should You Try to Avoid Probate?).

A will can also be part of a plan to reduce estate taxes, though at this time the Federal estate tax exemptions is high enough ($5,450,000 for those who die in 2016) that most estates will avoid Federal estate tax whether or not there is a will. Currently (as of 2016) there is no estate tax in Indiana; in Illinois the estate tax has an exemption of $4,000,000. (See Do You Need to Worry About Death Taxes?.)

Even if you are satisfied with the way that the rules of intestate succession would divide the value of your property among your heirs, you may wish to have more flexibility in deciding the particulars of the matter. One surefire way to put your heirs into conflict with one another is to have them become co-owners of real property. There are various ways to avoid co-ownership or to mitigate its divisive effects. You are more likely to accomplish this with a will (or trust) than without one.