Some estates have beneficiaries. The person who died established a clear estate plan naming specific people to inherit their property. A large portion of all estates transfer assets to heirs instead. The person who died did not leave testamentary documents, and therefore only those with a statutory right of inheritance receive property from the intestate estate.
Spouses, children, parents and other family members may be the heirs of an intestate estate. While they may expect to receive property from the estate, that is not always what happens. In some cases, an estate may lack the resources necessary to provide an inheritance to heirs.
Financial obligations come first
Heirs may think of their inheritance rights as absolute, but they are often secondary to the rights of outside parties. Creditors, tax authorities and others owed money by the deceased party may have a right to payment before beneficiaries inherit anything from the estate.
Personal representatives administering an estate must send notice to creditors to allow them to file a claim for repayment. They must also file tax returns and ensure that they properly address all of the financial obligations of the person who died. In some cases, the amount they owe exceeds the total value of the estate. In that situation, the estate is insolvent, and heirs may not inherit anything.
Those concerned about their rights as heirs or worried about conflict during estate administration due to an insolvent estate may need guidance from a legal professional. Learning more about the law and reviewing the financial status of a testator at the time of their passing can help both heirs and personal representatives recognize when an estate may not have anything to distribute after settling financial obligations.