This is the second in a series of posts on intestacy. Click here for the first part (Introduction to Intestacy).
The next issue becomes what assets are covered by the intestate statutes. It seems pretty simple but, just like probate administration, the intestate statues, generally, only control probate assets. Non-probate assets typically fall outside the parameters of the intestate statues but not always. This stands to reason because the intestate provisions are incorporated within the probate process.
But what are probate assets? Generally, any asset that is controlled by the operation of law falls outside the bounds of intestacy. Any other assets, those that would be controlled by the provisions of a will, if it existed, would be controlled by probate and in this case the intestate provisions.
Examples of an asset controlled by the operation of law would be a piece of real estate owned under joint tenancy by the decedent and at least one other person – like a husband and wife owning their home. Another example of non-probate assets would be a paid-on-death (“POD”) account that lists a beneficiary – like a mutual fund. Life insurance policy listing a beneficiary would be another example of an asset falling out side of the intestate code. The rest of the assets would be disbursed by intestate provisions.
However, there are a couple of catches that people need to be aware with respect to non-probate assets not being controlled by probate/intestacy. If a decedent names the estate as the heir on the decedent’s life insurance death benefits or POD account, and there is no will, then the intestate provisions that disburse assets to beneficiaries would control disbursement of the life insurance death benefits.
The same process would occur if a person owned an asset, like a piece of realty or stock by themselves or owned an asset as tenants-in-common (TIC) with another person. Under TIC, the other co-owner with the decedent does not have an inheritable ownership interest in the decedent’s part of the asset owned by TIC.
Another way the intestate provisions would govern a non-probate asset is if the decedent named a person that does not exist or, more likely, has died without heirs. For example, if a decedent/husband names his wife as the beneficiary on his mutual funds but she has predeceased him and there are no contingent beneficiaries named then it would usually fall within the confines of intestate statutes to determine who receives those assets.
Though probate and non-probate assets can typically be divided very easily, dying intestacy and not taking the correct steps to name beneficiaries on assets could mean those assets might be controlled by the intestate provisions.
The next part will deal with the issue of each local jurisdiction/state dividing out the intestate assets in diverse ways with different priority views.