When the State Decides Who Gets Your Assets
Last week we were discussing whether and under what circumstance a person who is mentally impaired can execute a will. So what happens if a person dies without a will? How are assets passed in that case?
New Jersey has a law that predetermines how assets are passed in cases where there is no will, what is known as an intestacy statute. I should first point out, however, that there are other ways to transfer assets at death without a will. Jointly held property with rights of survivorship is one way. When one co-owner dies the surviving co-owner(s) take ownership of the deceased co-owner’s share automatically by law. Another way to transfer property at death is to designate a payable on death or transfer on death beneficiary.
But, any assets which are not co-owned and have no beneficiary designations will pass by way of the intestacy laws, provided there is no will. So, how do the assets get distributed? First, we must determine if there is a spouse. If the decedent (deceased person) has no descendants (ie. children, grandchildren etc.) or parents alive, the spouse receives the entire estate. The spouse also receives the entire estate if the decedent’s descendants are also descendants of the spouse and the spouse has no other descendants.
In other words, the spouse receives everything if there were no other children from any other relationship, meaning there are no stepchildren. Presumably, when the surviving spouse dies, he/she will leave those assets to his/her children, but not necessarily stepchildren. The intestacy laws try to account for that scenario.
If there are stepchildren – and that could be stepchildren of the decedent or the surviving spouse – then the spouse gets what usually amounts to a bit more than ½ of the estate. The rest is split between the decedents’ descendants, making sure that the stepchildren don’t get cut out.
I’ve had many a conversation with people who have inherited assets under the intestacy laws and who have told me that this is not what the person would have wanted. My answer is that New Jersey gives us all the opportunity to decide for ourselves. But, if you take a pass on that opportunity by failing to execute a valid will, then someone else – the State of New Jersey – will make that choice for you. And since the state has arbitrarily decided in all cases how assets will pass, it is not going to work for everyone. So, if you don’t want the State to make the choice for you, be sure you have a validly executed will.