You can’t take it with you, so what happens to your assets when you die? People generally want to pass their wealth to their surviving spouse and children--but how can they do that? Individuals can pass assets to a spouse and children by drafting a will or trust or by letting a probate court administer the estate through intestate succession governed by the estate code where the person lived prior to death.
Historically, laws of succession were generally written to benefit powerful interest groups such as aristocrats or wealthy merchants. Inheritance is a major source of wealth for many people--around 80 percent of American household wealth was inherited rather than earned.
Originally, the laws of succession were shaped and controlled by wealthy groups for their own benefit. For example, early English laws of succession were developed to protect the interests of kings and wealthy aristocrats who owned large estates in feudal tenure. English common law and feudal tenure produced the doctrine of primogeniture—the inheritance of titles and all family real estate by the eldest surviving son. This system of inheritance ensured that wealthy English families would continue to own large estates for generations. In contrast, the American colonies developed democratic laws of inheritance designed to meet the needs of families who owned small farms. Most colonial fathers passed the family farm to their sons in equal shares.
The laws of succession in a few southern colonies developed along lines similar to English primogeniture because aristocratic owners wanted to pass everything to their first-born son and keep the family plantation intact. Today, Americans who own significant assets generally draft wills or trusts to control the inheritance of their property and distribute their assets equitably among the surviving spouse and children.
To understand how your assets are distributed when you die, you need to know about wills, trusts, probate, estate administration, and intestate succession—which are all described in my book.
A person makes a disposition of his real and personal property by a written will that takes effect after his death. A trust is a legal entity created by a grantor for the benefit of designated beneficiaries under the laws of the state and the valid trust instrument. The trustee holds a fiduciary responsibility to manage the trust’s corpus assets and income for the economic benefit of all of the beneficiaries. Probate is a procedure for proving the validity of a will, legal rules for administering the estate according to the terms of the will, proper steps for closing the estate administration once all the assets have been collected, debts paid and the assets distributed to beneficiaries according to the terms of the will. State laws of intestate succession control who takes an individual’s assets when he or she dies without a will or trust.
The basic elements of an estate plan include a will, power of attorney, medical power of attorney, directive to physicians, a HIPAA release, and a living trust if an individual wants to avoid the expense and publicity of probate or have minor children or disabled family members who need care, guidance, and support. A will can be changed at any time by drafting a new one or adding a codicil to an existing will. If there is no will, state intestate laws control who takes the assets according to the current estate code where the person lived before death. Wills and trusts have served numerous purposes over the centuries in England and America, but they have ancient origins in the early legal systems of Mesopotamia, Greece, Rome, and England.
Our modern laws of succession can be traced to the Code of Hammurabi which contained several early rules about inheritance. Greeks introduced the use of wills to transfer land when the father died and there was no surviving son. The Romans borrowed ideas about succession from the Greeks and formalized them in the Twelve Tables which listed the rights and duties of every Roman citizen, including laws of inheritance. In early Anglo-Saxon law, the will was an important document that could dispose of personal property and prove the ownership of land after the owner died. In modern times, with the development of recorded deeds and land-title records, the ownership of assets can be proved independent of a will. Other modern instruments, such as a living trust, tenancy in common with right of survivorship, or a pay on death bank account (often called a Totten Trust) can be substituted for a will. The most important alternative to a will is the living trust which can hold and distribute assets during the life of an individual and transfer ownership at death to named beneficiaries without the need for probate.