I have frequently heard friends and acquaintances tell me: “I have to have a will done so my assets will not ‘go to the state’ when I die.” In almost all instances this is an inaccurate statement! Laws in different states will vary on this but the laws in Arizona address most situations where an individual dies without a will.
First, if the deceased person owned an asset or assets in joint names with another person or persons “with rights of survivorship”, such assets will pass to the surviving owner or owners. These assets will not “go to the state”. Examples of such ownership are: John Doe and Jane Smith, joint tenancy with rights of survivorship; John Doe and Jane Doe, community property with rights of survivorship. Also, in most cases, joint accounts in a banking institution will pass to the surviving joint owner(s). There are other less common forms of joint ownership not included in these examples.
Second, if the asset has a beneficiary or beneficiaries designated, the asset will pass to the beneficiary or beneficiaries and not “go to the state”. Examples of beneficiary designations on a bank account are “payable on death to John Doe” or “pod to John Doe”. On a stock, bond or securities account, the beneficiary designation will read “transfer on death to John Doe” or “tod to John Doe”. However, if the designated beneficiary named on the account is “the estate of . . .”, you have to look to the rules of “intestate succession” discussed below because distribution of the asset will be determined by those rules.
On an IRA or 401(k) account or qualified retirement plan account, a beneficiary or beneficiaries can be named with the institution holding the account. If a beneficiary or beneficiaries are named, the account will not “go to the state” but to the named beneficiary or beneficiaries. However, if the designated beneficiary named on the account is “the estate of . . .”, you have to look to the rules of “intestate succession” discussed below because distribution of the asset will be determined by those rules.
Life insurance proceeds will not “go to the state” if there is a beneficiary or beneficiaries named. Instead, the proceeds go to the named beneficiary or beneficiaries. However, if the designated beneficiary named on the account is “the estate of . . . .”, you have to look to the rules of “intestate succession” discussed below because distribution of the assets will be determined by those rules. The same is true for annuity contracts.
But, what if there is an asset that is not joint with rights of survivorship and doesn’t have a beneficiary designated? Will the asset “go to the estate” if I die without a will?
Every state has a statute or statutes which direct who will receive the assets of a deceased person if none of the above is applicable. These statutes are commonly referred to as rules or statutes of “intestate succession”. The rules will differ so one has to check the statutes of the applicable state. Generally, this would be the state where the deceased person is domiciled for assets other than real estate. Ownership succession of real estate will generally be governed by the state where the real estate is located. These rules establish priorities based on the relationship between the decedent and relatives of the decedent.
The basic rules in Arizona are:
- If the decedent is unmarried and has no children:
a. the assets pass to the parents of the deceased person, if living;
b. if parents are not living, the assets pass to the siblings of the decedent or descendants of deceased sibling(s);
c. if parents are not living and there are no surviving siblings and no surviving descendants of deceased siblings, the assets pass to the grandparents of the decedent;
d. if grandparents are also deceased, assets pass to aunts and uncles of the decedent and descendants of any deceased aunt or uncle.
- If the decedent is married and has no children or the decedent’s only children are also children of the decedent’s spouse, the assets pass to the surviving spouse.
- If the decedent is married and has a child or children who not children of the decedent’s surviving spouse, the decedent’s one-half of community property passes to the decedent’s children. The decedent’s separate property passes one-half to the surviving spouse and one-half to the decedent’s children.
The only situation in which the decedent’s assets pass to the estate is if the decedent left no living relative set forth above! Although it may occur and does on occasion, it is unusual.
As stated at the beginning, the rules set forth in this blog apply to Arizona only although other states will have similar (not necessarily identical) rules and statutes.