As an estate planning attorney, I often get asked by clients whether it is even necessary to have an estate plan prepared (for purposes of this post, a Last Will and Testament). They generally assume that, upon their deaths, their respective assets will simply be distributed to those whom they want the assets to go to, "no muss, no fuss." Sometimes, a client will relay that he or she told a family member or friend that one item or another will go to that person upon the client's death, assuming that such item will actually make it to that person at the designated time. In short, the clients assume that an estate plan is not necessary, and that their respective assets will simply go where they "need" to go. Whether these assumptions are true requires a look at the laws of "intestate succession."
A bit of background: A person who dies without a Last Will and Testament is said to have died "intestate." That person's "net estate," which includes "the real and personal property of [the person], except property used for the support of the surviving spouse and children and for the payment of expenses of administration, funeral expenses, claims and taxes," is distributed according to the laws of intestate succession. ORS 111.005(24); ORS 112.015. So how do those laws go about distributing the assets of a deceased person's estate? Rather complicatedly, as it turns out:
Spouse's Share
- If the person dies leaving behind a spouse and no "issue" (defined as "all lineal descendants" of a person, e.g., a child or children, including "adopted children and their issue"), the person's spouse inherits the entire "net estate" (see above). ORS 111.005(23); ORS 112.035.
- If the person dies leaving behind a spouse and issue, that are also the issue of the spouse, the person's spouse inherits the entire "net estate." ORS 112.025(1).
- If the person dies leaving behind a spouse and issue, one or more of whom are not the issue of the spouse, the person's spouse inherits one half of the "net estate." ORS 112.025(2).
Issues's Share
- If the person dies leaving behind a spouse and issue, one or more of whom are not the issue of the spouse, the issue inherit one half of the "net estate," in equal shares. ORS 112.025(2); ORS 112.045(1).
- If the person dies leaving behind no spouse but issue, the issue inherit the entire "net estate." ORS 112.045(1).
Other's Share
- If the person dies leaving behind no spouse and no issue, the person's parents, or the survivor, inherit the entire "net estate." ORS 112.045(2).
- If the person dies leaving behind no spouse, no issue, and no parents, the person's siblings and/or the issue of the person's deceased siblings inherit the entire "net estate." ORS 112.045(3),
- If the person dies leaving behind no spouse, no issue, no parents, and no issue of a parent, the person's grandparents and/or the issue of the persons deceased grandparent(s) inherit the entire "net estate." ORS 112.045(4)(a).
- If the person dies leaving behind no spouse, no issue, no parents, no issue of a parent, no grandparents, and no issue of a grandparent, the person's estate "escheats," and the "net estate" reverts to the State or Oregon. ORS 112.055.
I did warn you that the laws of intestate succession are complicated. Please also keep in mind that the above is not an exhaustive look at the laws of intestate succession, and there are many other nuances and intricacies to the laws, which brings us to back to my clients' assumptions.
I suppose a person could get lucky. If who the "intestate" person want his or her estate to go to happens to match up with who inherits that person's estate under the laws of intestate succession, that person's assets will be distributed to whom he or she wants them to go to, "no harm, no foul." However, such luck cannot be counted on. A simple example will suffice: Take the case of Thomas, who wants his toy train collection to go to his brother upon Thomas's death. Thomas dies without a Last Will and Testament ("intestate"), leaving behind a spouse and no "issue." Will Thomas's toy train collection go to his brother? No. Under the laws of intestate succession (ORS 112.035 to be specific), Thomas's toy train collection, as part of his "net estate," will be inherited by his surviving spouse (who happens to have hated Thomas's toy train collection). With a little imagination, many more like-scenarios can be imagined where the assets of an intestate person do not go where that person hoped they would. In short, then, my clients' assumption that an estate plan is not necessary, and that their respective assets will simply go where they "need" to go, is, in a majority of cases, false. This leads us to a major advantage of an estate plan (i.e., a Last Will and Testament): The creator of the Last Will and Testament, not some statute, decides where his or her assets go upon death.
The Last Will and Testament affords its creator (called a "testator," from the Latin word for "will") the opportunity to specify to whom (or what) his or her property is to be distributed upon his or her death. Such provisions in the Last Will and Testament supersede the laws of intestate succession with respect to the distribution of the person's assets, and the creator of the Last Will and Testament can rest assured that his or her property will be distributed according to his or her wishes. ORS 112.227. Peace of mind that one's property will go to whom he or she wants it to upon his or her death is extremely valuable. No one wants to have to continually consult the laws of intestate succession every time a family member dies or has children to determine who will inherits his or her assets; the Last Will and Testament eradicates such a burden and gives its creator much more flexibility with respect to who inherits his or her assets (e.g., allowing the creator to designate that his or her assets be distributed to a non-family member or organization). The Last Will and Testament also affords its creator another major advantage: The creator decides who will manage his or her assets through the dreaded (but ultimately nonthreatening) probate.
What is probate, you ask? Probate is the legal process by which the estate of a deceased person ("decedent") is administered. Probate involves a court proceeding in which the court validates the Last Will and Testament of the decedent (if any), considers claims against the estate (e.g., for money), and oversees the distribution of the decedent's assets, either according to the laws of intestate succession or according to the decedent's Last Will and Testament. During this process, the court appoints a "Personal Representative" (called an "executor" in other jurisdictions) to manage the decedent's estate. (There is a common misconception that the creation of a Last Will and Testament obviates the need for probate. Let me dispel that misconception here and now. The creation of a Last Will and Testament does not by itself avoid probate.)
The Last Will and Testament allows its creator to select the person that he or she wants to manage his or her assets during the probate process. Under Oregon probate law, the court gives preference to the Personal Representative named in the decedent's Last Will and Testament when appointing the Personal Representative. ORS 113.085(1)(a). Conversely, where a decedent dies "intestate," naming no person to act as Personal Representative of his or her estate, the court looks to other persons to serve as Personal Representative--e.g., the decedent's spouse or nearest of kin. ORS 113.085(1)(b)-(c). If the decedent has no Last Will and Testament, the person appointed by the court may not be the person the decedent would have chosen to manage his or her estate. This may not seem like a big deal, but it is. The Personal Representative is responsible for gathering the decedent's assets and taking inventory of them, transferring title of the decedent's assets into the name of the Personal Representative (as a fiduciary of the estate), bringing legal actions to collect assets belonging to the decedent, dealing with the decedent's creditors (i.e., claims against the estate), handling the tax matters of the estate, and, ultimately, distributing the decedent's assets to those persons entitled to them. The prudent person will not want to leave who is in charge of all his or her worldly possessions to chance. Peace of mind that, upon death, one's property will be managed by a responsible person of the creator's choosing is immeasurably valuable, and the Last Will and Testament gives its creator the ability to so-designate such a person.
It is not hard to see why creating a Last Will and Testament is preferable to allowing one's estate to pass by intestate succession. As noted above, the major advantages of a Last Will and Testament are that it allows its creator to specify to whom or what his or her assets are distributed upon his or her death (instead of relying on a complicated statutory distribution scheme), and it allows that person to specify a Personal Representative of his or her choosing who will be in charge of the decedent's worldly possessions during the probate process. The Last Will and Testament also affords its creator a myriad other advantages not discussed above. For example, the creator of a Last Will and Testament who has a minor child or children may specify in his or her Last Will and Testament who will be the guardian(s) of the minor child or children upon his or her death.
If the choice is between relying on the complicated laws of intestate succession and relying on a Last Will and Testament, which, among other things, expresses its creator's desires with respect to distribution and management of his or her estate, and thereby gives its creator peace of mind, the choice is clear: The Last Will and Testament.
If you are interested in learning more about the Last Will and Testament or are interested in having a Last Will and Testament prepared, please do not hesitate to contact me. I will be more than happy to speak with you and prepare your estate planning documents.
More to come: While certainly a necessary step above relying on the laws of intestate succession, depending on the nature of one's estate, the Last Will and Testament may not be the best or most cost-effective choice for disposing of one's assets after his or her death, and the Last Will and Testament certainly fails when it comes to managing one's estate during life. Another option is the Trust, which will be considered in a future post.