A lot of money will be passed down from one generation to the next in the United States over the next few decades. As all these assets change hands, not every transfer will work out smoothly. In fact, unclaimed inheritances — when someone dies and no one receives their property — are surprisingly common.
Heres a look at what happens in this scenario as well as some of the rules around intestate succession.
Getting an inheritance after a loved one has died can be a sad and happy time. Even though the inheritance might help with money, it’s always hard to lose a loved one. However, sometimes an inheritance goes unclaimed for various reasons. So what happens in these situations?.
An unclaimed inheritance refers to assets or property that were meant to be inherited but never made it to the intended heir. There are a few common scenarios that can lead to an unclaimed inheritance:
The deceased died without a will
If someone passes away without having a legal will in place (known as dying intestate), it can be difficult to determine who the rightful heirs are. Without clear instructions in a will, the probate court will have to follow state intestacy laws to distribute assets. However, if no heirs can be identified, the inheritance may go unclaimed.
Beneficiaries were unaware of assets
In some cases, beneficiaries simply don’t know about certain assets or accounts owned by the deceased. If the inheritors are unaware of the inheritance, they won’t take any action to claim it. Poor record keeping or lack of communication about finances can lead to this situation.
Beneficiaries reject the inheritance
There are a variety of reasons an heir may choose to reject or disclaim an inheritance. They may want to avoid estate taxes, creditor claims, or the responsibilities that come with certain assets. Regardless of the reason, a rejected inheritance typically goes unclaimed.
Named beneficiaries predeceased the decedent
If the person named to inherit assets in a will passes away before the will-maker that bequest lapses. Unless alternative beneficiaries are named, that inheritance may end up unclaimed.
Errors in will or estate administration
Mistakes made during the will drafting process or errors in probate proceedings can also result in unintended outcomes. If the will or probate courts make a mistake, assets may not get distributed as intended.
What happens when it’s found that an inheritance has not been claimed? Usually, after a certain amount of time, unclaimed property ends up in the hands of state governments. Each state has a division that is in charge of collecting and holding on to lost property until the rightful owner comes forward.
Here’s a quick overview of the unclaimed inheritance process
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Assets are turned over to the state – Banks, financial institutions, and other entities holding unclaimed assets are required to turn them over to the state’s unclaimed property administrator after a dormancy period, which can range from 1 to 5 years.
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The state holds the property – The state will hold unclaimed assets until the owner or heir comes forward to claim them States typically hold unclaimed property indefinitely in perpetuity
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Asset may be liquidated – After holding unclaimed assets for a set time (e.g. 1 year), some states will liquidate the assets, selling off property and converting other assets to cash. The proceeds are still held indefinitely for the rightful owner.
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People who are looking for a lost inheritance can search state unclaimed property databases for free to see if they have any assets that need to be claimed.
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Filing a claim – If you locate unclaimed assets in a state database, you’ll need to file a claim and provide documentation proving your rights to the inheritance.
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Receiving the inheritance – Once approved, you’ll be able to reclaim your inheritance from the state and finally receive the assets you’re entitled to.
It is important to know that there is no federal database for lost and found property. All unclaimed assets and inheritances end up in state custody. But you should also see if the federal government is owed any money. For example, the IRS may hold on to tax refunds or the PBGC may have lost pension benefits.
The time limits for claiming an inheritance also varies by state. In Texas and Florida, heirs have no statute of limitations and can reclaim assets at any time. But other states, like California and New York, impose stricter time limits that typically range from 1 to 5 years. After that time, your right to claim the inheritance expires.
To avoid issues with unclaimed inheritance, it helps to take some proactive steps:
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Make your wishes clear – Draft a legally valid will and keep it updated to prevent confusion over your intentions. Consider using a revocable living trust as well.
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Communicate with beneficiaries – Tell intended heirs about assets you want them to inherit so they can claim them. Share information about your estate plan.
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Name contingent beneficiaries – Line up backup beneficiaries in case your primary beneficiary dies before receiving an inheritance.
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Review regularly – Periodically review your will and beneficiaries to avoid an inheritance going to someone you no longer want to receive it.
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Use a professional – Hire an experienced estate planning lawyer to help ensure your wishes are properly documented and assets go where intended.
Dealing with the loss of a loved one and navigating the estate settlement process can be difficult. The last thing you want to deal with is an inheritance falling through the cracks. By understanding the ins and outs of unclaimed assets and following some best practices, you can avoid this headache and ensure your heirs receive what they are entitled to.
How Can I Claim a Missing Inheritance?
If you find lost money and property from your deceased loved one, you should contact the state agency or other company holding the property about their claims process. They will tell you what forms to fill out. You will need to provide proof of your ID, such as your Social Security number, as well as why you are entitled to the property as the heir.
If you have a copy of the deceaseds will showing they wanted you to inherit their property, that would verify your claim. If the deceased died without a will, you would need to show how you meet your states intestate succession laws, such as being the next in line to have the property as a child or a spouse. If you are not related to the person who died, like if they were a friend, you would not be able to claim the property without a will. Theres no legal right.
Once you file the claim and submit the necessary evidence, the government or company will review it. If your claim is approved, theyll transfer the property and money owed to you.
Is There a Time Limit?
The amount of time you have to claim an inheritance depends on the laws of the state. For example, Californias government waits three years for individuals to pursue unclaimed property theyre owed. At that point, they consider the property abandoned and absorb the missing money into the state coffers. They would also sell physical property, such as real estate and jewelry.
Your claim for the inheritance wouldnt end, though. If you can prove you should have received the inheritance, the state government would pay the money owed to you. The earlier you can settle this process, the less complicated its likely to be.
What Happens If Someone Doesn’t Claim Their Inheritance? |
FAQ
What happens if someone doesn’t claim their inheritance?
If family members don’t make an effort to claim this money, any unclaimed assets become the property of the state, which can be a tragic loss if someone in the family really needed the cash. If you suspect that there may be unclaimed assets from deceased relatives, you may want to do a search to find it.
Is there a time limit to claim an inheritance?
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.
What happens if you don’t declare inheritance?
If you disclaim an inheritance it will stay as part of the deceased’s estate and will be re-distributed. The problem with this is that you have no control over where the asset goes. It could pass to someone who you would prefer not to receive it.
Is it illegal to withhold someone’s inheritance?
It’s essential to understand that these scenarios are not based on personal discretion but are guided by the deceased’s last will and state laws. Common legal grounds for an executor to withhold beneficiary funds include: Payment of the deceased’s debts and taxes. Expenses related to the administration of the estate.