When it comes to passing someone’s assets on after they die, states already have laws on the books for how this should be done. These laws can allocate those assets to a surviving spouse, the person’s children, their parents, their siblings and other relatives.
If someone dies intestate, that means they have passed away without creating an estate plan. Because there isn’t a will to give instructions on what they want to happen to their assets, state law takes over. For instance, there are cases when all assets would pass to a surviving spouse. The person may have wanted to pass those assets down to their adult children, but this won’t happen unless they create an estate plan specifically for that purpose.
What problems can this create?
The biggest problem, as noted, is that intentions and realities won’t always line up. This can be an issue with financial assets, sentimental items, real estate and much more. The person’s family is at the mercy of how the laws were constructed, even if they believe that those laws don’t match up with what their deceased loved one would’ve wanted.
It can also create issues with taxes. Estate plans are sometimes used to reduce the value of the estate—by transferring financial assets into an irrevocable trust, for example—to minimize how much will need to be paid in taxes. But state law doesn’t make any of these types of provisions, so more of a person’s assets may go to the government than they expected. This could deprive family members of assets they thought they would inherit.
The best way to avoid all of these complications is to draft an estate plan in advance. This may start with a will, but there are many other documents to consider. It’s important for people to know exactly what legal steps they can take at this time.