Who inherits when there is no will

Many people think that estate and will planning is only for the elite. Nothing could be further from the truth. If you have an asset (can be anything from a bike to a private airplane), you need to create a will, period! Though more people now than ever realize the importance of creating a will, many people still downplay the significance of writing a will. Ever wondered what happens to an estate of a person who passes away without making a will? We try to answer this question in this blog.

A person who dies without a will is said to have died intestate, meaning that the local intestacy laws (of the state) will decide how their property such as bank accounts, real estate, securities, and other assets will be divided. Real estate acquired in a different state than where the deceased person resided will be handled according to the intestacy laws of the state where it is located.

The laws of intestacy succession will vary depending on whether the person was single or married or had kids. In most cases, the estate of a person who died without making a will is divided between their heirs, which can be their surviving spouse, uncle, aunt, parents, nieces, nephews, and distant relatives. If, however, no relatives come forward to claim their share in the property, the entire estate goes to the state.

What Happens If a Single Person Dies Without a Will?

If a person dies single and childless, their surviving parents will get the estate. In case there are no surviving parents, the property will be divided among siblings (half siblings included) in equal parts. If one parent is dead, the property will be divided between siblings and the surviving parent. If a single person dies without creating a will and does not have any surviving parents, siblings, or descendants of siblings, the property will be divided equally among relatives on the father’s and mother’s side.

If a person dies single, but has children, the property will be divided among them in equal parts. The share of dead children (if any) will be passed on to their kids (the property owner’s grandchildren).

What Happens If a Married Person Dies Without a Will?

If a married person dies without a will, assets will be divided depending on how they were owned. While community property will go entirely to the spouse, separate property will be divided among the spouse, siblings, and parents. If the person was married multiple times, the entire property will pass on to the current spouse (if they have kids from the person). If, however, the property owner does not have kids from the current spouse, the property will be divided equally among them and the kids from another spouse.

What Happens If a Person in a Domestic Partnership Dies Without a Will? 

Many states do not recognize domestic partnerships. If a person in a domestic partnership dies without a will, the state will decide how the property will be divided.

What Happens If a Person in a Live-in Relationship Dies Without a Will?

If a person living with a partner without marrying them dies, the surviving partner won’t inherit the property as intestacy laws only recognize relatives.

There is more to inheritance laws than meets the eye. At Johnston Thomas Law, we are committed to helping our clients navigate the complex legal framework. We are one of the most sought-after law firms in Santa Rosa. No matter how complex your case, our legal experts will come up with the right legal strategy for you. To talk to an estate planning attorney in Sonoma County, call us at 707-545-6542.

Who should sort the estate out?

A person who dies without a will is known as ‘dying intestate’.

This can make sorting out their estate a bit more complicated because the law decides who inherits the estate according to certain criteria called ‘intestacy rules’.

If there’s a relative or friend who is willing and able to sort out the estate, they can apply for a ‘grant of letters of administration’ - also known as grant of representation, grant of probate, or confirmation (in Scotland).

This grant makes them the ‘administrator’ of the estate and allows them to value the estate, pay any debts and distribute the estate according to the intestacy rules.

Sorting out an estate without a will usually takes more time. So, the sooner you apply for probate, the sooner you can distribute the estate to heirs.

If there are no surviving relatives, the person’s estate passes to the Crown.

HM Treasury is then responsible for dealing with the estate.

If you choose to take on the job of administering the estate, you can:

• use a probate specialist, or
• sort out the estate yourself.

Using a solicitor or probate specialist

Sorting out an estate where there is no will is sometimes tricky. Especially if it’s not clear what assets the deceased had, or there are complex family relationships which make distributing the estate under intestacy rules difficult.

In these types of situations, it’s sensible to consider using a solicitor or accountant that specialises in probate.

Using a probate specialist can also make the process of sorting out intestacy easier and a bit quicker, even for less complicated estates.

If you do decide to use a probate specialist, you should budget for several thousand pounds for their services.

Sort out the estate yourself

If you decide to take on the job of administering the estate, you can still pay a solicitor for their time, if there are some things such as checking over the probate application, or working out how to distribute the estate.

The process of sorting out an estate without a will is almost the same as when there is a will. If you want to sort out the estate yourself, see our guide What to do when someone dies and leaves a will?

Preparing for grant of probate

The first step in applying for probate involves some ‘hunting’ and a little paperwork. Specifically, you need to find certain documents and make copies of them.

These documents are needed as you go through the process of getting probate.

Find and make copies of important document

You’ll need to get at least six certified copies of the following documents:

• death certificate
• birth certificate
• marriage or civil partnership certificate, if the person was married.

You’ll need to attach copies of these various documents to probate forms, and to access the deceased’s bank accounts, investments or life insurance.

Before you can apply for probate, or confirmation if you live in Scotland, you’ll need to value the estate.

When you fill in the probate forms, you need to put in how much the estate is worth.

To value the estate, you need to find out the following information.

1. Find out the value of any assets, such as property, private pensions, savings, shares, jewellery, or valuable collectibles. If you think the item is worth more than £500, you should get it professionally valued.
2. Find out the value of any gifts that the person gave away in the seven years before they died. You’ll need to include these in the value of the estate. Certain types of gifts which were given away before the person died might incur Inheritance Tax.
3. Find out how much debt they have if any, such as a mortgage, credit cards or loans. You should include funeral costs as part of the debt if the estate is paying for the funeral. If there is joint debt, you’ll need to work out how much is the deceased’s share of that debt.
4. Work out how much the estate is worth once the debt(s) are paid.

You’ll also need to work out if they had any jointly owned assets, such as a bank account or a property.

Depending on how it’s owned, you may have to include it in the value of the estate.

Value jointly owned assets

Before you can work out the value of the deceased’s share of a jointly owned asset, you’ll have to find out how it was owned.

Examples of this type of assets are a car, a house or a piece of land.

They may have owned this asset either as:

• a ‘joint tenant’, or
• a ‘tenant in common’.

Asset owned as ‘joint tenants’

• both owners have equal rights to the whole asset
• the asset automatically goes to the other joint owner if one of them dies
• the deceased can’t pass on their ownership of the asset in their will
• you have to value the asset and include it when working out the Inheritance Tax. But, there may not be Inheritance Tax to pay on this asset if the value falls within their tax-free allowance.

Joint bank accounts are nearly always held as ‘joint tenants’.

So, while ownership of the account usually automatically passes onto to the joint account holder, you do need to value it as part of the deceased’s estate.

To value the deceased’s share of a joint bank account, you need to find out the balance in the account and divide it by the number of account holders.

HMRC usually scrutinises joint accounts held by unmarried couples or other combinations (such as parent and child) more closely.

This because the normal exemptions from Inheritance Tax might not apply, and that the surviving joint holder(s) could be liable for a certain amount of tax.

Asset owned as ‘tenants in common’

• each owner can own a different share of the asset
• the asset doesn’t automatically go to the other owner if one of them dies.
• the deceased can pass on their ownership of the asset in their will.
• you have to value the deceased’s share of the asset and include it when working out the Inheritance Tax.

Not sure how an asset is jointly owned?

If the deceased owned other assets, such as shares, you’ll need to contact the company:

• to find out how it was owned
• work out how much the deceased’s share of the asset was, and include that as part of the estate.

For property or land, if you can’t find this information in their papers and records, you can get it for a fee, from:

How to collect the deceased's assets

You can get access to the deceased’s financial assets (such as bank accounts) by asking banks and other institutions to release the deceased’s assets to you.  

You should open a separate bank account for the estate, to avoid getting it confused with your own personal bank accounts. 

Opening a separate bank account will also make it easier for you to see the value of the deceased financial assets, and might also help avoid any disagreements between beneficiaries of the deceased’s will. 

The banks might refer to this type of account as an ‘executorship account’ or client account if solicitors are acting for them. 

Safety of money held in an executorship account

If you choose to open a separate bank account, you should also consider opening it with an entirely separate bank to your own.

This is so you can be sure that any money held in the bank account has the full Financial Services Compensation Scheme (FSCS) protection.

While the FSCS does allow a temporary £1million deposit protection for up to six months for ‘proceeds of a deceased’s estate held by their personal representative’, they can’t guarantee this protection if your bank or building society goes bust.

The standard amount of protection is £85,000 per financial institution (some banks share a licence, eg, Halifax and the Bank of Scotland), which might be lower than the value of the deceased’s estate.

Working out Inheritance Tax

Once you’ve got the value of the estate and how much debt the deceased had, you need to work out the Inheritance Tax due.

If the total value of the estate after debts are taken out is over £325,000, then there may be inheritance tax to pay.

This tax is due within six months from when the person died. And interest is charged if it’s not paid within six months.

So to help avoid paying this interest, consider paying some or all of the Inheritance Tax before you finish valuing the estate. If you’re paying this from your own account, you can claim it back from the estate.

Applying for grant of probate

Once you’ve valued the estate, you’ll need to fill in a few forms and send it to the nearest Probate Registry office.

You’ll also need to pay an application fee.

How much you need to pay and what forms you need to fill in depend on if you live in England or Wales, Scotland or Northern Ireland.

Once they’ve received your application, the probate office will contact you to arrange for you to swear an oath.

You can do this either in the local probate office or in the office of a commissioner for oaths.

You don’t normally need to apply for probate if the estate was either:

• jointly owned and so passes to the surviving husband, wife or civil partner, or
• doesn’t include land, property or shares.

If you live in England and Wales

The application fee is £273 if you do it yourself or if an estate uses a solicitor to apply for probate, on all estates over £5,000.

You can apply for probate online on the GOV.UK website

If the person died abroad, there are different forms to fill in. Find them at GOV.UK

Depending on the size of the estate, there are different forms to fill in:

The confirmation fee varies depending on the size of the estate.

If you live in Northern Ireland

You’ll need to request an appointment with your local Probate Office. Once you’ve an appointment, they’ll help you complete the necessary forms.

The Probate Office will also ask you to bring various documents such as the will and death certificate, when you go for your appointment.

The fee is £261 for estates worth more than £10,000. There’s no fee to pay if the estate is worth less than £10,000.

If the estate is worth more than £325,000, you’ll need to pay at least some if not all of the Inheritance Tax before probate is issued.

If you think you’ll struggle to pay the tax because you need to sell assets from the estate first, you could ask HMRC for a grant of credit

A grant of credit means that you can get probate first so that you can sell off the assets to pay the tax.

Paying off debts and taxes

When you have probate, you can then contact the organisations that are holding the deceased’s assets, such as the bank or private pension provider.

They’ll ask for a copy of the probate or confirmation letter before they’ll release the assets.

You can then pay the various debts (if any) and the taxes due.

If the assets are in the form of property or shares, you might need to sell this in order to pay off the debts and taxes.

If you’re looking to sell a property:

• You can get advice on valuing a property and the costs involved as well as selling tips on the Which? website
• Read our Quick house sales guide if you’re thinking of using a quick house sale company instead.

If you’re disposing of shares:

• You might want to consider doing this yourself, if the amount of shares is small.
• For a complex portfolio or if the shares are worth a lot, it’s a good idea to get professional advice. You could also speak to an adviser if you’re unsure about whether to sell these shares. Read Choosing a financial adviser for more guidance.

Distributing the estate according to intestacy rules

After you’ve paid the debts and taxes, you have to distribute the estate according to the intestacy rules.

The surviving husband, wife or civil partner who was still legally married to the deceased can inherit the estate.

The deceased’s children might also inherit part of the estate if it’s worth more than a certain amount.

Close relatives such as surviving parents or siblings of the deceased could also inherit the estate in certain situations.

Each country has a different rule for working out who gets what and how much.

If the estate is worth less than £270,000, the spouse will inherit the entire estate.

But if the estate is worth more than £270,000 and there are children:

• The spouse inherits up to £270,000 worth of assets, all the deceased’s personal possessions, half of the remainder of the estate.
• The other half is divided equally between the children.
• If any child is under the age of 18 when the person died, his or her share is held in statutory trust.
  He or she will receive their inheritance when they reach the age of 18, or when they marry or enter into a civil partnership, whichever comes first.

If the estate is worth less than £250,000, the spouse will inherit the entire estate.

If the estate is worth more than £250,000 and there are children:

• The spouse will get up to £250,000 worth of assets and all the deceased’s personal possessions – if there were no children, it would be £450,000.
• If there is only one child, then the spouse also gets half of the remaining estate and the child gets the other half.
• If there is more than one child, the spouse gets a third of the remaining estate, and the remaining two thirds is shared between the children.

If there are no children or surviving close relatives, the spouse gets the entire estate.

If there are children, the spouse is entitled to the following (these are known as ‘Prior Rights’):

• The house up to a value of £473,000, or a lump sum of £473,000 if the house is worth more.
• Furniture and household goods up to the value of £29,000.
• Up to £50,000 in cash if the deceased left children. If the deceased did not leave children, then £89,000.

After the ‘Prior Rights’, there are ‘Legal Rights’ to the remaining estate:

• The spouse would get a third of the moveable estate if there are no children. If there are children, then one-half.
• The children are similarly entitled to one third of the moveable estate if there is a spouse, and one-half if there is no spouse.

After satisfaction of Legal Rights, the remainder of the estate passes in accordance with a list of priority, set out in the Succession (Scotland) Act 1964.

The Scottish Law Commission is looking into simplifying the rules on intestacy.

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