There are many benefits to taking the time to plan your estate – but what happens if you don’t? When an individual dies without a will, that person dies “intestate.” In this scenario, the distribution of the deceased individual’s estate is carried out in accord with the rules of intestate succession.
For a real life example, we will pretend pop icon Prince died as a resident of North Carolina. Prince is reported to have an estimated estate of $200 million, and he had no will to direct the distribution of his assets at his death.
In North Carolina, the first question to ask is if the deceased individual, or decedent, has a surviving spouse. The spouse’s share of the estate is calculated before the state looks to any other heirs. Although Prince had been married twice, neither of his surviving ex-wives are entitled to take from his estate because Prince was unmarried at the time of his death.
In the next stage of intestate succession, the estate administrator must determine who gets to take from the estate and how much each individual should receive.
North Carolina law determines who takes from the estate based on the following “levels”:
These levels indicate the order of priority when determining who gets to take from the estate. If there is a deceased individual at one level, the State moves down that column until it finds a living heir or heirs who may take from the decedent’s estate — i.e., children, then grandchildren, etc. If there are no surviving heirs in one column, the state will jump over to the next column and start the process over. Once the estate administration moves to the grandparents level, the share is split between the maternal and paternal ancestry lines. If the State is unable to find a living heir who is entitled to take under this system, then ownership of the estate property will be transferred to the State.
At the time of his death, Prince had no surviving children, grandchildren, or parents. Consequently, all of his estate would be distributed among his surviving siblings and the surviving descendants of his deceased siblings. The state of North Carolina does not distinguish between half-siblings and full siblings.
When it comes to determining how much each individual will receive, North Carolina law dictates that heirs at the same level—i.e. brother or sister—take from the estate in equal shares. In order to calculate the share of an heir, you divide the estate by the number of surviving individuals at that level, then add the number of deceased individuals at that level who have surviving heirs. This amount is distributed to the surviving heirs at that level. The remaining shares that would have gone to the deceased individuals are then combined and distributed at the next sub-level of eligible heirs using the same calculation. This process continues through a 5th degree of kinship or until all heirs of deceased individuals have been paid.
Since this description is rather dense, let’s apply it to Prince’s estate. Let’s assume at the time of his death, Prince had 6 surviving siblings and 1 deceased sibling with 2 living children, and an estate valued at $100 million after estate taxes and legal fees. Prince’s estate would be distributed as follows:
$100,000,000 / (6 surviving siblings + 1 deceased sibling with surviving descendants) = $14,285,714.30
Prince’s 6 surviving siblings would therefore take $14,285,714.30 each from the estate. The remaining shares of $14,285,714.30 would then be distributed at the next level of inheritance:
$ 14,285,714.30 / (2 surviving descendants of deceased siblings) = $7,142,857.15
After calculation, the deceased sibling’s children would take $7,142,857.15 each.
Most of us don’t have Prince-level assets. But, super wealthy or not, when you don’t have a will the State decides how your assets are distributed. If you’re in that position, it might be time to check this to do off your list.
Image by Scott Penner, available for use under Creative Commons Attribution ShareAlike 3.0