Intestacy is the default estate plan created by state statute. If you fail to sign a valid will prior to your passing, your state's intestacy statute becomes your default estate plan and will ultimately determine how your estate will be distributed. The estate distribution dictated by the statute is based upon what the state assumes you would want to happen to your assets, since you failed to leave any instructions. It does not change based on your actual needs, preferences or family.
Intestacy is often the most expensive type of estate plan. The application of the statutory defaults to your specific situation, instead of the specific directions in a will, is more expensive for a number of reasons:
Most intestate estates involve formal probate, while most will-based probates are informal. Formal probate means that the judge is more involved, requiring additional filings, hearings and steps.
Most intestate estates involve the use of an attorney, sometimes per the judge's order, to prepare the additional filings and conduct needed research.
The administrator of an intestate estate will likely need to post a bond, which is usually waived in a will.
Intestate probate usually takes substantially more time than if the decedent had a will.
Intestate estates are often subject to numerous disputes over the identity of the current heirs and the proper administration of the estate.
Who administers an intestate estate?
In your will, you name a personal representative to handle the administration of your estate. Generally, you select someone you know and trust who will follow the instructions in your will regarding the distribution of your estate. Without a will, a probate judge, who likely does not know you or your family, will appoint an administrator for your estate. The judge's selection will be based on a statutory (state-mandated) preference list that is very similar to the list of intestate heirs. The first person on that list who agrees to serve who the judge finds to be acceptable becomes administrator. If all of your relatives live out of state, the judge may name an in-state co-executor or require a local attorney be retained.
What are the issues with intestacy?
Intestacy statutes aim to provide the estate distribution you would want. They are essentially the state's "best guess" as to what your will would say if you had created one. The statutes are a poor fit in a number of circumstances.
The intestacy statutes in most states are based upon the assumption that spouses get married once and any children are the children of both spouses. This assumption is no longer true for a majority of married couples, and as a result, statutes often fail to meet the wishes of those with blended families.
Intestacy statutes do not work well for unmarried couples. Intestacy statutes define heirs as only relatives by blood, marriage or legally adopted. Unmarried partners are not related by either blood or marriage, so they are not heirs under this statute. They are also not on the preference list to be the administrator of each other's estate.
Minor, special needs and spendthrift beneficiaries
Intestacy statutes are inflexible. They determine your heirs and direct the immediate and unconditional distribution of your assets to your heirs. If your statute-defined heirs are minors, special needs persons or spendthrifts, the resulting asset distribution will be problematic.
What are the risks of Intestacy?
Intestate estates face a higher risk of litigation, which can quickly exhaust an estate's assets. The litigation risk is higher because the decedent's intentions for the distribution of their assets are unknown. Disappointed children of the decedent may file suit because of the unexpected outcome of not receiving an inheritance at their parent's death. Intestate estates also often feature disputes over the identities of the correct legal heirs under the statute, especially when the decedent lacked a spouse or immediate family members. There can be disputes over what property the decedent owned, especially for unmarried couples. Finally, intestate estates are often the target of people who claim the deceased owed them money.