Flyover 1 - Intestacy

We're going to kick off the teeny section of this course by looking at some of the issues that come up most often on the MEE. You can consider these lessons a kind of greatest hits compilation. We've pored over the last 10 years of bar exam questions, and we found all the patterns and tricks that the bar examiners use.

Intestacy

We'll start with a brief look at intestacy. Intestacy is the condition of dying without a will. What happens if you don't plan for your death? Well, in every state, the legislature has adopted a statute that serves as a kind of backup will. If you don't make a final testament, these intestacy laws tell us how to distribute your property.

Intestacy doesn't come up too often on the MEE, so we won't spend a ton of time on it here, but let's walk through the basic scheme. If you die without a will, who gets your stuff? In most states, the hierarchy of takers under intestacy is (1) your spouse, (2) your descendants, that includes your kids and grandkids, (3) your parents, (4) descendants of your parents, that would be like siblings and nieces and nephews, (5) grandparents, and then (6) those people descended from your grandparents, so aunts, uncles, cousins.

For example, let's assume that Romeo has kicked the bucket. If Romeo was married to Juliette when he died, she would get the biggest chunk of his stuff. The surviving spouse generally gets at least half of the estate, and sometimes they get all of it, especially if the dead person doesn't have any kids.

If Romeo wasn't married, or if there's money left over after Juliet takes her cut, then his stuff would be split between his kids. Okay, what if Romeo had no spouse or kids? In that case, his parents would inherit his estate. And if Romeo had no spouse, no kids, no parents, then the descendants of his parents are up next. That generally means that his siblings would split his stuff. And if any of Romeo's siblings died before him, their children, Romeo's nieces and nephews, would take their parents' share.

A couple of recent MEE questions posed the following issue: if Romeo dies and his only surviving relatives are a niece and an uncle, who inherits his fortune? What do you think? In almost every state, if Romeo doesn't have a will, the niece would take Romeo's stuff. The niece, a descendant of Romeo's parent, takes precedence over the uncle, a descendant of the grandparent.

The one big exception is civil law jurisdictions. Civil law jurisdictions have a completely different intestacy system that focuses on the degree of relationship, the amount of blood that the dead person shares with the beneficiaries. Romeo shares 25% of his genes with both his niece and his uncle, so they would split Romeo's estate in a civil law jurisdiction.

We should probably talk about one more issue before moving along. What happens if a child dies before a parent? The hypos here get a little complicated. You probably need to sit down, grab a pen, and graph out these problems.

Let's assume that Chris, a widower, had three daughters: Chloe, Courtney, and Kim. Chloe has one child, A, Courtney has three children, B, C, and D, and Kim has four children, E, F, G, and H. What happens to Chris's stuff if all of his kids predecease him? Predeceased means died before. How does the money get split between his grandkids?

Per Stirpes

States have taken different approaches to this problem.

The most traditional approach is called per stirpes distribution. Per stirpes gives each branch of the family the same amount. How many branches are there in our problem? Well, Chris's family has three branches. We calculate the number of branches by adding up the number of living children and the number of dead children that have living descendants.

In this example, a per stirpes jurisdiction would divide Chris's stuff into three even shares, one each for Chloe, Courtney, and Kim, because they each have living descendants. One-third of the estate would go to Chloe's branch of the family. That means that A would take a third of Chris's property. One-third of the estate will go to Courtney's branch of the family. That means B, C, and D would each take a ninth. That's a third of a third of Chris's stuff.

Likewise, Kim's branch of the family would take one-third. E, F, G, and H would get a twelfth of the estate, one-fourth of one-third. Traditional per stirpes treats each branch of the family the same. However, as you can see, Chris's grandchildren end up getting wildly different amounts.

Modern Per Stirpes

In reaction to this perceived unfairness, many states have adopted an alternative approach to intestacy known as modern per stirpes. Modern per stirpes is virtually identical to traditional per stirpes, except for one key difference. Modern per stirpes makes the original division of assets in the first generation where there is at least one living person.

In this example, Chloe, Courtney, and Kim are all dead. There's nobody alive in the children's generation. Therefore, in a modern per stirpes state, we would divide Chris's stuff into branches at the grandchildren's generation. We make one share for each living grandchild and one share for any dead grandchild that has descendants. Here, there are eight living grandchildren, so we would divide Chris's estate into eight even slices. Each grandchild gets the same.

In practice, modern per stirpes and traditional per stirpes are the same unless all of the dead person's children are dead. If all of the decedent's kids have predeceased them, then you should split the money evenly between the grandkids.

Per Capita at Each Generation

In the last few years, a third approach has emerged from the Uniform Law Commission. Dubbed per capita at each generation, the idea of this approach is that everyone in a like generation should get a like amount. To understand this method of distribution, we need to change our hypo just a little bit.

Let's now assume that Chloe has survived Chris. Courtney and Kim remain dead. Per capita at each generation starts off just the same as modern per stirpes. You make the original division of assets at the first generation in which there's at least one living person. In our example, we would make our original division of assets at the kids' generation because Chloe is alive.

There are three branches: one for Chloe, who's alive, one for Courtney, who's dead but has descendants, and one for Kim, who's dead but has descendants. Each living individual in this generation gets their share. Chloe would take one-third of the estate. Now, here's where per capita at each generation diverges from modern per stirpes.

The shares of the deceased children, Courtney and Kim, are combined and then split evenly among the younger generation. Courtney and Kim's one-third are combined and then split evenly between B, C, D, E, F, G, and H. Each of those grandchildren would get one-seventh of two-thirds of the estate. Chloe's child, A, doesn't take anything at this time because she will ultimately inherit from Chloe.

One final question: would any of this change if Chloe had been adopted? The answer is no. Adopted children are treated exactly the same as biological children. Upon adoption, the child is reborn into the new family and the ties with the old family are severed. The only big exception to this rule is if the child is adopted by a step-parent. In some places, adoption by the spouse of a biological parent allows the adoptee to inherit from both their adopted and biological family members.