Most people assume that their close relatives will inherit only what is left to them in the will. Inheritance laws are more complex than this and there are some unexpected inheritance rights that you may not anticipate.
No last will
If you die without a will, your estate is divided among your closest relatives according to your state’s intestate statutes. Generally, this divides your assets among your spouse and children. If you have no spouse or children, it is divided among grandchildren, parents, or other more distant relatives.
Inheritance law is particularly complex when it comes to what your spouse is entitled to. If you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin; Alaska is also included if you and your spouse sign an agreement creating community property) any property earned or obtained during your marriage is community property. Property you each brought into the marriage or received via gift or inheritance during the marriage is not included and remains separate. Each spouse owns one half of the community property of the marriage. When you die, you can decide in your will who gets your half of the community property, but you can’t give away the half your spouse owns. This can make it difficult for inheriting a house owned in the marriage. If the home is community property, you can’t give it in full to your child or anyone else you select. You can only leave your half of the ownership. Note that you and your spouse can create a written agreement affecting ownership and distribution of your community property that can supersede the community property inheritance law.
Your spouse’s right of election
Most non-community property states have laws that prevent complete disinheritance of a spouse in a will. When determining what is inheritance for a spouse in these states, it is important to understand the spousal right of election, or elective right. This law states that no matter what your will says, your spouse has a right to inherit one-third or one-half (depending on the state and sometimes depending on the length of the marriage) of your total estate. To exercise this right, your spouse has to petition the probate court to enforce the law. If your spouse does not do so, your will is carried out as it is written. Note that these laws in most states apply only to assets that are passed through a will. You can transfer your property using other methods, such as trusts, pay on death accounts, and gifts during lifetime to avoid the right of election.
Changing your will after a divorce
If you and your spouse get a divorce, but you don’t get around to changing your will, most states invalidate any provision in the will leaving things to your ex. This is not true in all states, so it is important to change your will after you divorce. You can still leave things to your ex after your divorce but it is best to have a new will written that clarifies this.
Children have no right of election under a will. If you disinherit your child his or her only option is to contest the will, get it thrown out, and inherit part of your estate under state intestacy statutes. There is an exception: if you write your will, then have a child or children born or adopted after the date the will was created, many states assume you meant for your “after born children” (as they are called) to be treated the same way you treated the children named in your will. So in this multiple inheritance situation, if you left all of your estate to be divided among your two living sons (so they would get 50% each) and then you have a daughter after the will is signed, all three children would receive 33%. This same rule is also sometimes applied to after born grandchildren. One state, Florida, has a law that prohibits the head of a family from leaving a home to anyone but a spouse or minor child if they are alive, so children receive some protection there.
Taxes on inheritance
Inheritance tax is applied no matter how the assets are transferred—via a will, through intestate succession, or through a right of election. Probate taxes are applied to any assets passing through probate, and estate tax applies to estates over $5.43 million for federal tax. Each state sets its own state estate tax, with many states not having any.
Inheritance laws are complex, and it is important to understand your state’s rules when you are creating your will or planning your estate. Careful planning will allow you to ensure your assets are passed to the people you intend to receive them.
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