Wills, Inheritance, Marriage, and the Social Cost of the Law

I just read a piece in the Washington Post that floored me. NFL player Sean Taylor was murdered in November 2007. The piece is about how his 49 year old mother inherited nothing, and how that has left her in dire financial straits. Apparently he used to hand out gobs of money to relatives and bought property for her she cannot afford now. He left $5.8m largely to his daughter, who is now 3 years old. A few lessons are clear:

1. If you depend on someone for your livelihood, consider purchasing life insurance. That's what it's for.
2. Intestate succession is not all that complicated. Here's the basic order of inheritance (who gets your stuff) if you die without a will: (1) spouse + children (2) parents (3) siblings (including half-siblings but not stepsiblings) (4) grandparents (5) aunts/uncles (6) cousins. These are degrees of kinship most people can remember easily. The basic rule is that if there is even one person in the class, they get it all. The next class gets nothing if there is one person in the class above.
3. The rules are a bit complicated between spouse and children (most common issue). The general rule is that spouse gets half, kids get half, although most states give the spouse a certain amount of money (like $50,000 or more) before kids get any. In a community property state like California, the spouse gets all the community property first before splitting separate property (if any) with kids). For most people in most states, these rules mean that unless you have some significant wealth, effectively 100% goes to the spouse even if you have kids. The bottom line is your spouse will get between 50% and 100% of everything if you have kids, 100% if you don't.

4. Note the holes in the rules. The following persons, among others, are nowhere in the line of succession: stepparents, step-siblings, girlfriends, boyfriends, fiance(e)s, unmarried partners of either gender, persons in civil unions except where the definition explicitly extends to inheritance, people you call "uncle" who aren't, uncles and aunts who are related by marriage rather than blood, and pets.

5. Illegitimacy no longer matters. It used to be a complete bar to inheritance. There is still an issue of unrecognized paternity, however.

Unfortunately, Sean Taylor had a kid, but no spouse, something becoming all too familiar. Had he died before the child was born, his mother would have inherited all $5.8m. Had he been married to his child's mother, she would have received 50-100% of the estate. As it stands, the kid gets everything and the kid's mother nothing. This is one of the reasons why marriage is important. And Sean's mother also gets nothing. I read this article and felt ill. Sean Taylor was a very wealthy man and father who left everything to chance. That is callous and irresponsible. I feel sorry for his girlfriend more than his mother. The mother should know better than to depend on a child for income; a girlfriend with a baby should expect to be taken care of.

Know the rules. Prepare. Life insurance may be more important than a will. Remember one thing about all succession, with or without a will: two classes always inherit above all others: (1) government (2) creditors. Life insurance generally (and for obvious policy reasons) allows you to avoid those.

Similar issues arose with Hurricane Katrina in Louisiana, where unsettled property rights have effectively impoverished and disinherited thousands. There is a great hidden class discrimination and social cost to our system of legal inheritance borne by those who don't hire lawyers to draw up wills and don't, at least, get married and create legal relationships that way.