In the United States, estate preparation is still a problem that people experience. A survey conducted by the Pew Research Center reveals that only 32 percent of American adults possess a will. This indicates that a significant number of the American population has no planned means of transferring ownership of their property after their death.
Losing an adored family member comes with responsibilities that can overwhelm you, especially as you try to address the emotional stress that comes with the death of a loved one. You may feel stressed by the legal processes and urgent matters related to the deceased individual’s property, assets, and debts.
What are the inheritance laws in Nevada and other states? Different states have different inheritance laws. In Nevada, when a husband or wife passes, the surviving husband or wife gets to keep half of the properties that the couple had owned together. The rest of the inheritance goes to the will. If there is no will, the assets and properties are subjected to Nevada’s law of intestacy.
Most other states follow similar intestacy rules. Arizona, California, Idaho, Louisiana, New Mexico, Texas, Washington, and Wisconsin are among the states that treat property acquired during a marriage as jointly owned by both spouses.
There are many factors that influence the outcome of how an estate is distributed when there is no will.
Let’s examine how the laws of inheritance operate and their implications for wealth distribution.
What Inheritance Law Governs and What It Does Not
Inheritance law is concerned with the legal process of determining to whom a dead individual’s property goes. This may differ from one state to another, while in other ways it intersects with federal tax law, especially in relation to large estates.
Inheritance law is simply an attempt to address the question of who inherits what through one of three paths: the terms of a valid will, the terms of a trust, or the laws of intestate succession.
If a decedent dies intestate, then the state distributes his or her property according to intestate laws. Immediate family members, such as the spouse and the children, take precedence. If the decedent is unmarried and childless, the property may pass to the parents or siblings.
A person who dies intestate does not simply lose complete control of everything in an arbitrary manner. The default scheme followed by the state reflects the legislature’s intention to assume what people would choose anyway.
Inheritance laws do not apply to all assets that remain at the time of death. Assets that have named beneficiaries, like life insurance, pensions, payable-on-death accounts, and transfer-on-death security accounts, pass directly to those persons regardless of any provision made in the will.
In the case of assets owned in joint tenancy with right of survivorship, the remaining owner(s) receive those assets directly. These types of asset transfers fall outside of the probate process.
The Probate Process: What It Does and Why It Takes Time
Probate is a court procedure for administering the estate of a deceased individual. It involves validating an existing will, appointing a personal representative to manage the entire process, paying off the decedent’s debts and taxes, and releasing the remainder of his/her estate to the rightful recipients.
The time the probate process takes largely depends on the state and the complexity of the matter. In some jurisdictions that employ fast-track proceedings, an uncomplicated and uncontested estate will be processed within a few months.
Issues with creditors, audits of taxes, appraisals of business interests, and estates that are located in different jurisdictions will prolong the probate process. One reason for the extension is that each jurisdiction requires conducting a supplemental probate process.
The creditors are also allowed to file their claims within the legally allowed window. The timing of the claims varies from one jurisdiction to another, but usually, it takes between three to six months from the appointment of the personal representative.
One of the major reasons why probate takes long is the involvement of the waiting period for the creditors.
According to probate lawyer Cynthia R. Cox, having an attorney to guide you through the process and handle court filings on your behalf can protect you from making costly mistakes that could land you in trouble with creditors, judges, and other parties.
Common Sources of Probate Disputes
Will contests are the most contested form of probate litigation. There are several reasons why a will could be challenged, including lack of testamentary capacity in the testator, which means that the person didn’t know what he or she was doing or wasn’t aware of his/her assets.
The person may claim that the will was executed under undue influence from a party exploiting his/her authority and power over the testator. If the will contest is won, it will either render the will invalid in its entirety or in part. The result of the will contest will change the way the estate is administered, either according to a previous will or intestacy laws.
Misconduct by a personal representative is another source of probate problems. Executors and administrators owe a fiduciary duty to the estate and to its beneficiaries. Failure to account for assets, improper distributions, unlawful investing of estate assets, and even inaction would all constitute breaches of fiduciary duty. Beneficiaries who suspect misconduct by the representative can apply to the courts for an accounting, surcharge, or removal of the representative.
Planning to Reduce Probate Exposure
The best way to avoid probate is with a revocable living trust. All property placed in the trust during the individual’s life becomes the trust’s property upon death, rather than remaining with the individual.
The trustee simply follows the instructions provided for distributing the estate according to the provisions of the trust.
Only the items placed under a trust will be able to avoid probate. A trust that was properly drafted but never funded will not achieve its purpose. A deed to the real property that was never put into proper record or bank accounts that were never retitled will still undergo probate.
There is also beneficiary designation review. Maintaining your beneficiary designations current will help guarantee that the asset is transferred directly to the intended recipient, without any probate process or conflict with the rest of your estate planning.
If the beneficiary designation is outdated and refers to someone who is deceased or an ex-spouse, the outcome may deviate from the intentions of the account holder.
Federal and State Tax Considerations
An estate that has a gross valuation in excess of the applicable exclusion amount, which is $13.61 million per individual in 2024 (adjusted for inflation), is liable to pay the federal estate tax. If an estate falls below this mark, it will not owe tax liabilities, regardless of how the assets are distributed or organized.
There is also the question of state estate and inheritance taxes. They do not conform to the federal guidelines in any way. In some cases, a state will levy estate tax at levels much lower than the federal standard threshold.
An heir who is not closely related to the deceased can still have to pay inheritance tax even when no estate tax has been paid to the government under federal law.