What Happens to Your Property if You Don’t Have an Estate Plan?
If you have no estate plan in place, there is a high likelihood that someone you love will have to navigate the court system in order to determine the distribution of your property after you pass away. This process is called probate. Here a short overview of the probate process for individuals who do not have an estate plan in place.
Probate Process Snapshot
1. Your loved one must open a probate case in the court system.
2. An executor, or personal representative, is assigned. This person collects all documents, tallys all of the probate property involved, identifies the heirs, and notifies creditors.
3. There is at least a 6-month waiting period.
4. At the end of the waiting period, the executor can distribute out the probate estate according to your state’s plan.
So, how do you know if your property will need to go through probate? Here are three questions to ask yourself:
What type of property do you have?
What is the value of that property?
Who will get your property?
What type of property do you have?
Once you pass away, your property will be looked at from the perspective of is it probate property? Property that is required to go through the probate courts is referred to as “probate property.”
Here are some examples of probate vs. not-probate property classifications.
NOT PROBATE PROPERTY
Any property that is passed down by some type of contract where you name a beneficiary.
Life insurance
Retirement benefits
A trust that names beneficiaries as part of an estate plan
Real estate (depending on how the deed is written)
PROBATE PROPERTY
Probate property is everything else and MUST go through the probate process. This often includes:
Personal belongings ( furniture, clothing, vehicles, some real estate)
Bank accounts with no beneficiary or joint owner named
Real estate (depending on how the deed is written)
Any accounts where you fail to name a beneficiary
What is the value of your probate property?
less than $100,000
If your probate property is valued at less than $100,000 and you do not own any real estate, you may have the ability in Illinois to use a small estate affidavit to avoid the lengthy probate court process. There are pros and cons to using this. Pros include the ability to avoid the full probate process and the costs associated with navigating a case through probate. Cons include the fact that the person who signs the affadavit may be personally on the hook if they are misinformed about any of the property owned by the person who passed away or if they do not have a complete picture of the debts owed.
more than $100,000
If your probate property is valued at more than $100,000 or if you own real estate, then your family member will need to work through that probate process.
Who will get your property?
And do the people who are supposed to get your property agree on how your property should be distributed?
With no estate plan in place, the laws of your state’s intestate succession are what determine how your property is distributed. Intestate means you died without leaving instructions, and the state legislature gets to choose how your property is given away. The Probate Act outlines different possible scenarios and the way your property is to be distributed will depend on what your family makeup is. For example, if you have:
A spouse but no children
All your property will go to your spouse
Children but no spouse
All your property will go to your children
A spouse with children, and all children are alive
Your spouse will get half and your children will split the other half
A spouse with children, but some children have passed away
Someone may need to draw a chart to figure out the distributions!
No spouse, no children
The state will look to your parents, your siblings, you sibling’s children, etc. If they cannot find any living relative, the state gets your property.
Essentially, the state has already outlined what should happen with different family scenarios. None of these scenarios takes into account your personal financial circumstances, your family dynamics, or your charitable intent.
If you would like to read about how the state of Illinois defines these different scenarios, you can read about them here: Illinois Probate Act
Final Thoughts
Probate is a time consuming and often quite costly process, potentially costing your loved ones between $4,000 and $6,000. This is assuming everyone agrees on how to divide things up. If the division of your property is contested, probate costs will increase significantly as well as time to distribution. Oftentimes, your loved one will need to hire an attorney to help guide them through the process, which also comes at a cost.
One of the key benefits of creating an estate plan is to help avoid the probate process, and thus decrease the burden placed on your loved ones.
I hope you found this helpful! If you did, please share it with friends and family who might benefit from learning this information.
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We hope you found this information helpful. As a reminder, the information presented here is for general informational purposes only. You are unique, and legal advice should be tailored to your unique situation. Do not rely upon any information here as legal advice. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. If you would like to learn more about how we can protect your family or small business, please schedule an initial call with us!
Cherish Legal Group is an estate planning law firm based out of Rockford, Illinois. We provide estate planning services and general outside counsel to small businesses in Illinois and Wisconsin.