The world of estate planning is quite complex, and because of that, not very many people are familiar with it. The danger with this is that all sorts of avoidable mishaps can happen. That’s why at Trust & Will, we’ve made it our mission to break down barriers and help our readers better understand the process and advantages of estate planning. Our hope is that you will feel more empowered to protect yourselves and your loved ones.
One of the mishaps we see happen all too often is the tricky situation of an unclaimed inheritance in a will. (Read: unclaimed money that could have been yours!) In this guide, we’ll explore what usually happens if an inheritance goes unclaimed, why it happens, and what you can do about it. Our hope is to provide the information you might need to avoid this situation entirely.
What Happens If an Inheritance is Not Claimed?
Before we address what can happen if an inheritance goes unclaimed, let’s uncover why an unclaimed inheritance in a will happens in the first place.
The first scenario is when someone dies intestate with no designation. Intestate simply means that an individual has passed away without a Will. The result is the absence of legal documents that would have described how the individual’s property and assets should be divided. When the estate enters probate, inheritors can file petitions to try and claim their stake in the estate. This can be problematic, because multiple individuals can file petitions. Ultimately the court will make its decision by following the state’s intestacy laws.
There are also instances in which a loved one passes away, and yet their heirs are completely unaware that they have unclaimed property. This often happens when an individual has poor recordkeeping, or they themselves were unaware of a certain property or assets owned by the family.
Last but not least, an heir might have reason to deny their inheritance. This is a legal scenario called a “disclaimer of inheritance.” The heir must submit a valid legal document to formally refuse their inheritance.
Now, let’s talk about what happens when an inheritance goes unclaimed or disclaimed.
In the cases of both intestate and disclaimer of inheritance, the court will follow intestate succession rules established by the state. These rules are in place so that the decedent’s assets are passed on to the decedent’s next-of-kin as fairly as possible. Usually, the first person in line is the surviving spouse, followed by any surviving children. The succession line after this point tends to vary from state to state, but is a representation of surviving parents, grandchildren, and other family members. In the case of a disclaimed inheritance, the courts will usually treat the heir as predeceased and proceed to follow succession rules as well.
Although rare, there are cases in which the court cannot identify an heir. Mentioned earlier, there are also instances in which an inheritance goes unclaimed simply because no one was aware of it, including the courts.
When this happens, property is forfeited to the state. The legal term for this forfeiture is “escheat.” Each state has different rules for when escheat is triggered. One state might determine this outcome when they’ve reached the very end of the succession rule line. Another state might mandate this outcome early on to prevent individuals from receiving the inheritance without having had any real relationship with the decedent.
In summary, when there’s unclaimed inheritance in a Will, the inheritance is passed on to the next-in-line kin per the state’s succession rules. If the court cannot identify a rightful heir, the assets and property are absorbed by the state.
Is There a Time Limit on Claiming an Inheritance?
According to the U.S. Securities and Exchange Commission, the time limit on claiming your inheritance varies from state to state. California’s Unclaimed Property Law, for example, states that a financial asset is considered abandoned after three years. After this time period, the assets are collected by the State Controller’s office. Although the state will hold escheated assets for a limited period of time, they’ll eventually liquidate them.
Again, these time frames vary from state to state, so it’s recommended to consult directly with your state controller’s office.
How Do I Get My Unclaimed Inheritance Back?
If you know that you have unclaimed inheritance in a Will, there are a couple of things that you can do. First, see if you are able to determine the company that holds the unclaimed asset. If the asset has not yet entered escheatment and has not yet been turned over to your state, you can claim the asset directly from the company. These holders are required by law to make attempts to contact owners regarding their property, although the rules surrounding these attempts vary by state. You may discover some unclaimed property by checking the decedent’s mail.
The second strategy applies to anyone, regardless of whether or not they know they have unclaimed inheritance, or aren’t sure if their inheritance has been turned over to the state government. You can easily search for unclaimed an inheritance by visiting unclaimed.org, which is managed by the National Association of Unclaimed Property Administrators (NAUPA). From there, you’ll be connected to the respective unclaimed property program for your state or province to conduct a free search. If you suspect you might have unclaimed assets in multiple states, NAUPA provides a link to conduct a multi-state search.
If you’re able to locate an unclaimed inheritance, you would simply file a free claim with the state that holds the asset.
Can a Beneficiary of a Will Refuse Inheritance?
A beneficiary of a will can refuse their inheritance. Earlier, we explained that this action is formally called a “disclaimer of inheritance.” If the named beneficiary takes this action, then the probate court will treat the beneficiary as if they had predeceased the decedent. They will then identify the next-of-kin using the state’s succession rules.
Avoid This Confusion - Create Your Will Today
As you may have gathered, an unclaimed inheritance in a Will can create quite a headache. It forces your state’s probate court to invest more time investigating who should be the rightful heir to the unclaimed property. Further, it could be tricky for you, the rightful heir, to track down this inheritance and file a claim for it.
Unclaimed inheritances create a couple of different risks. The first risk is that the inheritance could be awarded to an individual in such a way that goes against the decedent’s wish, such as an alienated sibling or child. Second, as the heir, you could run the risk of having part of your inheritance get turned over and eventually absorbed by the state. It’s a cruel game to think that someone’s hard-earned legacy could be lost in the ether without your having known anything about it.
If you’d like to prevent this scenario from happening to your loved ones, you can proactively protect them by creating your own online Will today. Curious whether or not you might have an unclaimed inheritance floating out there? Take a gander and follow the tips we provided in this guide.
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