Top 10 Estate Planning Myths: #1 - Escheat - The State Gets My Stuff?
Escheat - When your property goes unclaimed and the State receives the property.
As an estate planning attorney, I routinely hear estate planning myths. This blog series is designed to dispel those myths by providing general legal knowledge about estate planning. There will also be accompanying videos that follow each blog post. This week’s myth covers the mistaken belief that if you die without a will, the State will receive all of your property and assets a/k/a escheat.
In North Carolina, dying without a Will is called dying intestate. You may also hear it called intestacy. Dying without a Will is not ideal (we’ll discuss this more in a future blog post). However, it does not mean that the State will receive all of your property and assets. If you die intestate, the State of North Carolina has devised a standardized, default estate plan that will account for factual circumstances at the time of your death. While the general process of administering your estate (which is called probate) will not be drastically different in cases of intestacy versus dying testate (with a Will), the person or persons who receive your estate as heirs under intestacy law may not be who you would have chosen to receive your estate.
Here are three example scenarios that show how dying intestate can impact the distribution of your estate to your heirs.
Married Person with 2 children - Your spouse will receive a one-third interest in all of your real property (land and houses) within the State of North Carolina and your two (or more) children will split the remaining two-thirds interest amongst themselves. With regard to personal property (anything that isn’t land or houses), the spouse will receive the first $60,000 in personal property and if there are sufficient assets, an additional one-third interest in the remaining personal property. This is different from what I see most spouses choose to do when they make a Will. Typically, spouses receive all of the other spouse’s property instead of fractional shares.
Married Person with No Children - Your spouse will receive all of your real property. With regard to personal property, your spouse will receive the first $100,000 in personal property and if there are sufficient assets, an additional one-half interest in the remaining personal property. Who receives the other one-half you ask? Possibly your parent(s)! If one or both of your parents are alive at the time of your death, they will receive the other one-half of the personal property. I have seen this result in parents receiving several hundred thousand dollars that they did not expect to receive. If your parents are not alive at the time of your death, your spouse will receive all of the personal property.
Single with No Children - In this case, there are two options. If your parents are alive, they will split your estate equally. If your parents have predeceased you, then your brothers and sisters will receive your estate. Once again, you may not think to give your parents your estate, especially if they are already of retirement age and not in need.
As you can see, the distribution of your estate could be drastically different from what you would otherwise choose. However, this myth, like any good myth, does have a modicum of truth to it. If you have no heirs or the heirs cannot be located, the State could eventually receive all of your estate. However, that is an extremely unlikely scenario and is not the default option if you die intestate.
While dying intestate will likely not result in your estate going to the State of North Carolina, intestacy is not the ideal scenario. You need an estate plan, even if you don’t think you have much. Give your family peace of mind and schedule a free estate planning consultation with me at your convenience using my Calendly scheduling link: https://calendly.com/coastallegalcounsel/epconsult.
Check back with us next week for Myth #2!