According to the latest information from Gallup.com, a full 54% of Americans die every year without estate planning documents (a will or a trust) meant to speak to how their property will be divided up amongst their loved ones. That’s incredible! Whatever the reason, we as a nation need to do better. And what most people don’t realize is that, by not putting a will or trust in place, you are, in fact, deciding how your assets will be divided: by the state of your residence, whether you would be happy with those decisions or not. Today please join us as we explore this important topic.
Webster’s defines a person who is intestate as someone who dies without a will. Again, it’s hard to understand why so many of us make this choice, but it’s a somber process that forces us to make hard decisions and face our own mortality. Some of one’s property is owned outside their estate owing to the fact that we have designated beneficiaries for that property, meaning we have made a decision up front about who will inherit it once we pass. Examples of this include life insurance, retirement accounts like 401Ks and IRAs, assets held jointly with another person or persons and Transfer on Death (TOD) Accounts or Payable on Death (POD) Accounts. Once a family member receives a death certificate from the funeral home after someone has passed, the transfer of monies or accounts like these can be accomplished relatively quickly. On the other hand is something called probate property which can be personal property, bank accounts or investment accounts owned solely by the deceased and which were assigned no designated beneficiary. This is where things get sticky and the state of residence steps in with very stringent laws as to who gets what. Depending on the circumstances, probate property can amount to a large part of a person’s estate and really make an impact on loved ones left behind. This property is divided up according to the state where the recently deceased had their primary residence.
If you die while the state of Illinois is your primary residence, ilga.gov describes how your non-beneficiary property gets divided. If you have a spouse but no children, your spouse will receive 100% of your probate property. Dying as a single person with children dictates that your children will equally divide the entire amount of your estate not already distributed to beneficiaries. If you have a spouse and children, the spouse will always get 50% and your children will equally divide the other 50%. If you have only parents and siblings, the parents and siblings will inherit equally, but if one parent is already deceased, the other parent will get their share along with the other parent’s share. If the deceased leaves no parents, children, siblings or descendants (children or grandchildren of brothers or sisters), the remaining estate will be divided equally among relatives from both the maternal and paternal sides of the family. And guess what? In the state of Illinois if you die without estate planning documents and no survivors, the great state of Illinois inherits your hard-earned money and accounts. How would you feel about that?
Just across the river in Iowa, the rules are different. According to nolo.com, if you have a spouse, whether or not you had children with that spouse, the spouse will be given 100% of your estate…leaving out the children from that marriage if you had any. If you have no spouse, but children, the children will inherit your estate equally. It gets tricky if you die while being married and have a child, but that child or children are born from someone other than your present spouse. In this case, the present spouse gets 50% of your real estate and 50% of your personal property that has not been passed to named beneficiaries if the real estate and personal property amount to at least $50,000.00 in value. If they do, the children from another marriage or relationship divide the remaining 50% equally. If the present spouse’s share is less than $50,000.00, they get to possess extra of the personal property and real estate until their share equals $50,000.00 before the children can claim their share. Just like in Illinois, if a deceased person leaves only parents or only siblings, those groups divide their loved one’s probate property equally. If a sibling has passed before the deceased, her or his descendants (children, grandchildren or great-grandchildren ) can divide up the proceeds from that branch of the family. And again, if there are no family members left after someone passes, the state of Iowa lays claim to your estate.
Do you need help with legacy planning? I’m here to help! Please email [email protected] or call 563-949-4705.
Securities offered through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC. Advisory services offered through J.W. Cole Advisors, Inc. (JWCA). Huiskamp Collins Investments, LLC and JWC/JWCA are unaffiliated entities.