Who Inherits Your Investment Portfolio If You Leave No Will?

Dying Without a Will Means Relying on the Laws of Intestate Succession

What happens if you die without a will?
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Ideally, everyone has their will finished, notarized, and on file with their estate attorney well before they pass. However, not everyone has their financial affairs in order when their time comes.

This unfortunate situation begs the important—albeit somewhat uncomfortable—question, "Who inherits your investment portfolio if you leave no will?" Where do your stocksbondsmutual funds, Roth IRA, 401(k), annuities, real estate properties, and other securities go once you've fallen off the mortal coil?

The short answer is that it depends. This general overview should give you a better understanding of the process.

Intestacy: Dying Without a Will

Unless you're well-versed in estate planning, "intestacy" will probably be a new word for you. All it means is "dying without a will." When a person dies without a will, the law regards them as having "died intestate."

In the U.S., intestacy is handled differently from state to state. Therefore, what exactly happens to an estate depends on where that person died. To find out exactly what happens in your state, check with your state's authorities. No matter which state you live in, intestacy cases will play out in what's known as "probate"—the legal process for handling estates.

Before getting to examples, there's one more term that's important to learn, and that's "escheatment." No matter what ownership guidelines are established by a state, escheatment is the very last resort: turning the property over to the state government. Escheatment happens to all abandoned and unclaimed property, so it includes cases beyond intestacy.

Intestacy Examples in 2 States

Below are two simplified and partial lists of what would happen in a variety of intestate situations in two states, Alaska and New York. Notice how intestacy quickly becomes complicated by common situations like second marriages, adoptive children, and step-parents.

In Alaska:

  • A surviving spouse who is the parent of surviving children gets 100% of the property as long as they don't have any children from other relationships.
  • If there are surviving children, but no surviving spouse, then the children inherit 100% of the property.
  • If there are a surviving spouse and surviving children from that relationship, but the spouse also has at least one child from another relationship, then the spouse gets $150,000 and 50% of the remaining property and the other 50% is split up among the deceased's children.
  • If there are no surviving spouse or children, then each of the deceased's parents each receives 50% of the property.
  • If there are no surviving spouse, children, or parents, then the siblings inherit the property.

In New York:

  • A surviving spouse gets 100% of the property, but only if the deceased did not have any children.
  • If there are surviving children, but no surviving spouse, then the children inherit 100% of the property.
  • If there are both surviving children and a surviving spouse, then the spouse receives $50,000 and 50% of the remaining property and the other 50% is split up among the children.
  • If there are surviving parents, but no spouse or children, then the parents inherit everything.
  • If there are no surviving spouse, children, or parents, then the siblings inherit the property.

Titles, Beneficiaries, and Other Ways to Avoid Intestate Succession

The easiest and most sure-fire way to bequeath your property in a manner you see fit is to create a will. However, a will isn't the only way to ensure that the property in an investment account winds up where you want it to go.

One way to avoid intestate succession is to title the property in ways that supersede all other considerations. You can add another owner to your investment account with "joint ownership with right of survivorship." Doing so will ensure that this person automatically gains access to the funds and property in the account upon your death, regardless of whatever happens with the rest of your estate. "Tenants by entirety" is another type of joint ownership, but it's specifically designed for couples. If you don't want to establish joint ownership, you can establish a transfer on death, so that the person doesn't own any of the property until you die. This method can also effectively increase your FDIC insurance limits.

It's important to update these titles and designations whenever any major life events change your circumstances. For example, if you get divorced, you may choose to remove your ex-spouse from a transfer on death for your account. Otherwise, it could be a lengthy, litigious, and entirely uncertain process for any of your heirs trying to receive that money from your ex.

Alternatively, you can title your property in the name of a revocable living trust. When designed correctly, these trusts bypass probate as well. Assets held this way, even if you die without a will, are handled by the trustee, such as a bank trust department, as provided in the trust instrument.

Article Sources

  1. Cornell Law School. "Intestacy." Accessed Jan. 27, 2020.

  2. American Bar Association. "Probate Process." Accessed Jan. 27, 2020.

  3. Securities and Exchange Commission. "Escheatment Process." Accessed Jan. 27, 2020.

  4. Alaska Court System. "Death Without a Will – Intestacy." Accessed Jan. 27, 2020.

  5. New York State Unified Court System. "Intestacy – When There Is No Will." Accessed Jan. 27, 2020.

  6. Fidelity Investments. "Investment Accounts: Transfer on Death." Accessed Jan. 27, 2020.

  7. American Bar Association. "Revocable Trusts." Accessed Jan. 27, 2020.