There are a number of popular tools for ensuring property does not end up in the possession of the state when someone passes away without a Will. Three of these tools include: (1) the state's particular "Intestate Statute," (2) naming an heir in the property deed, and (3) setting up a trust. Each of these tools is designed to allow a property owner to determine who will take ownership of his or her property upon passing away. It is important to note that one of these tools (Intestate Statute) will likely require a legal proceeding to determine ownership while the other two (property deed and trust) do not.
Intestate Statute
Every state in the United States has adopted its own set of laws for dealing with property owners who pass away without a Will. These laws are called "Intestate Statutes." The objective of these Intestate Statutes is to create a one size fits all system for distributing property to the heirs of a deceased person. In general, Intestate Statutes attempt to determine how the deceased would have distributed his or her property had he or she created a Will. To that end, most Intestate Statutes assume that husband and wife would have left property to each other (as opposed to a third party) had they created a Will. If no Will or other document disposing of the property can be found, a court will most likely award the property to a surviving spouse under the Intestate Statute. If there is no surviving spouse, the property will likely be awarded to the deceased's children in equal shares.
Naming an Heir in the Property Deed
There are a number of different ways to leave property to an heir using a property deed. The most popular property deed is the Warranty Deed. While the Warranty Deed is useful in transferring property in a real estate sale, it does not allow the new owner to name an heir in the deed itself. If the new owner passes away owning property under a Warranty Deed, his or her heirs will have to file a petition in Probate Court (either under the Intestate Statute or a Will) to determine who should inherit the property.
On the other hand, if the owner of real estate passes away owning property under an Enhanced Life Estate Deed, Life Estate Deed, or Transfer on Death Deed, the property will pass to the decedent's heirs without having to go to court.
Setting up a trust is very much like creating a fictional person whose job is to own and manage your property for your benefit. There are a number of tax, legal liability and estate planning benefits to setting up a trust. In general, a trust is a legal entity created to take possession of property either before or after you pass away. When you pass away, the trust is still “alive,” and continues to be owned and managed for the benefit of your heirs. Since the property is owned by a trust and not a real person, legal judgments against a real person do not attach to the trust property.
