UNDERSTANDING INTESTACY – What happens without an estate plan?
Many people, particularly young adults, do not prioritize establishing or maintaining an estate plan. This may be for a myriad of reasons. One explanation we hear from many is that they believe their assets would pass the same way by law if they died intestate (without a will) as they would direct the assets to pass in their will. However, one cannot be certain of this without familiarity with the rules of intestate succession. Furthermore, this oversimplification disregards many other potential issues whereby family interests could be impaired if no plan is in place and intestacy laws are left to govern.
1. Succession of Assets
An overview of inheritance rules under Maryland Intestacy Law is available HERE. One key takeaway is that the surviving spouse of an intestate decedent does not inherit the full estate by default. The allocation of assets among the surviving family members can change significantly depending upon whether any minor children, adult children, parents, etc. survive the decedent. A will bypasses this analysis by directly stating1 who inherits probate2 assets.
2. Appointment of Personal Representative
The Personal Representative (a.k.a. executor) controls an estate’s assets and is responsible for all aspects of the administration of the estate including filing tax returns, paying taxes and other expenses, resolving creditor claims, and making distributions. Maryland Law establishes an order of priority regarding who can serve as Personal Representative. The person appointed Personal Representative in a decedent’s will has the highest priority to serve. A will can also name multiple and/or Successor Personal Representatives, which can help ensure that the responsibility of administering the estate only passes to the desired person(s). If there is no will, the surviving spouse and children have the highest priority. Generally, more-distant relatives are further down in priority. However, the law allows for creditors of the decedent, or even any person with a pecuniary interest to apply. Thus, if there is no will, virtually anybody can assert their right to serve as Personal Representative. For intestate decedents, the statutory order of priority may not always lead to the ideal person serving.
3. Guardians of the Person for Minors
Maryland Law empowers the surviving parent of a minor to appoint, by will, one or more guardians and successor guardians of the person of an unmarried minor. Any guardian so appointed does not need to be approved by a court. Without a testamentary appointment, anyone interested in the minor’s welfare may petition the court to serve as guardian, which typically requires a hearing and is an intricate process. The appointment of a guardian in a will can thus eliminate any question of who the decedent’s intended guardian would be, and also circumvents the requirement to petition for guardianship – which can be time consuming and expensive.
4. Managing Assets for Minors
The person appointed as a minor’s Guardian of the Person has no legal control over assets inherited by the minor. A minor’s inheritance can be administered in various ways, discussed in further detail HERE. For intestate decedents, the most common options for managing assets inherited by a minor (i.e. Guardianship of the Property or a Court Restricted Account) are subject to heavy supervision by the Court, and typically culminate with the assets being transferred to the child at age 18. Families implementing an estate plan may opt for less court supervision and deferred transfer of assets until age 21 by appointing a custodian for the minor’s assets in their will. Alternatively, they can add testamentary trust provisions to their wills and tailor specific powers and restrictions regarding management of the inherited assets for the minor’s benefit – including customized age limits on when distributions to the child can occur. Such trusts, if designed correctly, can also potentially shield assets from creditors of the minor while they’re being held in trust for the minor’s benefit.
These are only a few of many issues that can surprise families of decedents that have no estate plan in place. To make matters even more complicated, jointly owned and beneficiary designated assets are not controlled by the terms of a will and often require re-titling or custom beneficiary designations in order to align with a family’s testamentary intent. Call us and schedule a meeting for us to review your situation and help achieve your estate planning goals.
1 However, even with a valid will in place, the Spousal Election may serve to counteract testamentary intent in some cases. For more information, click HERE.
2 Wills control “probate” assets, which are assets titled in the decedent’s sole name as of their death. Other assets, such as jointly titled assets or assets with beneficiary designations are “non-probate” and not subject to the terms of the decedent’s will.