When a spouse dies, inherited property passes according to how the property was legally titled, whether the deceased had a will, and which state law applies. The answer varies based on whether the inherited property was the deceased spouse’s separate property or became commingled with marital assets during the marriage.
The complexity arises from 26 U.S.C. § 1014, which governs the step-up in basis rules for inherited property, and state intestate succession laws that determine distribution when no will exists. These rules create different outcomes depending on whether you live in one of the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) or in a common law property state. When spouses fail to understand these distinctions, surviving family members can lose significant portions of their expected inheritance, and the estate may face unnecessary tax burdens exceeding $200,000 on a single property.
According to the National Association of Estate Planners, approximately 60% of Americans die without a valid will, leaving their assets subject to state intestacy laws that may not reflect their actual wishes. This creates confusion and conflict, especially in blended families where children from previous marriages compete with surviving spouses for inherited assets.
In this article, you will learn:
🏠 How property ownership type determines automatic transfer rights — Understanding joint tenancy, tenancy by the entirety, and tenants in common can mean the difference between immediate ownership and months of probate court delays.
💰 The tax advantages of community property versus joint tenancy — Discover how the double step-up in basis can save your family hundreds of thousands in capital gains taxes when structured correctly in community property states.
👨👩👧👦 Protections for surviving spouses against disinheritance — Learn about elective share statutes that give you legal rights to claim one-third to one-half of your deceased spouse’s estate, even if their will leaves you nothing.
⚖️ State-by-state differences in intestate succession — Each state has unique rules that determine what happens when your spouse dies without a will, and these rules dramatically affect whether children, parents, or siblings share in the inheritance.
🔐 Common mistakes that cost families their inheritance — Identify the critical errors in title transfers, beneficiary designations, and trust planning that cause loved ones to lose property they expected to receive.
Understanding Property Classification: Separate vs. Marital Property
Property classification forms the foundation of inheritance rights when a spouse dies. The law distinguishes between separate property and marital property, and this distinction determines who receives what after death.
Separate property includes assets owned before marriage, gifts received by one spouse during the marriage, and property inherited by one spouse from someone else (such as from parents or grandparents). These assets remain under the sole ownership of one spouse, even during a long marriage. For example, if Sarah inherited a beach house from her grandmother in 2010, and Sarah married John in 2015, that beach house remains Sarah’s separate property.
Marital property (also called community property in certain states) consists of assets acquired during the marriage by either spouse through work, business efforts, or joint investments. In community property states, both spouses own 50% of all marital property regardless of whose name appears on the title. In common law states, marital property ownership depends on whose name is on the title or who purchased the asset.
The classification matters because when a spouse dies, separate property passes according to that spouse’s will or state intestacy laws. Marital property automatically belongs 50% to the surviving spouse, with only the deceased spouse’s 50% share subject to distribution through the will or intestacy.
How Inherited Property Can Become Marital Property
Property that starts as separate property can transform into marital property through a process called commingling. This happens when separate property mixes with marital assets in ways that make it impossible to distinguish between the two.
Common commingling scenarios include depositing inheritance money into a joint bank account, using inheritance funds to improve marital property, or adding a spouse’s name to the title of inherited property. Once commingling occurs, the burden falls on the person claiming separate property status to prove the asset remains separate.
Consider this example: Maria inherited $100,000 from her father in 2018. She deposited this money into a joint checking account she shared with her husband Carlos. Over the next three years, they both deposited paychecks into this account and paid household bills from it. When Carlos dies in 2023, Maria cannot easily prove which portion of the account balance came from her inheritance. The court may treat the entire account as marital property, meaning half belongs to Carlos’s estate rather than remaining Maria’s separate property.
Property Ownership Types and Their Effect on Inheritance
The legal form of property ownership determines whether assets pass automatically to a surviving spouse or must go through probate court. Understanding these ownership structures prevents confusion and delays after a spouse’s death.
Joint Tenancy with Right of Survivorship
Joint tenancy with right of survivorship allows two or more people to own property together with equal ownership interests. When one joint tenant dies, their interest immediately ceases to exist, and the surviving joint tenant(s) automatically own the entire property.
This ownership form avoids probate, which saves time and legal fees. However, it creates a tax disadvantage compared to community property. Only the deceased joint tenant’s half of the property receives a step-up in basis to current fair market value. The surviving joint tenant’s half keeps its original cost basis, which means higher capital gains taxes when the property is eventually sold.
Joint tenancy also exposes assets to the creditors of any joint tenant. If one owner faces a lawsuit or bankruptcy, creditors can attach that owner’s share of the jointly held property to satisfy debts.
Tenants in Common
Tenants in common ownership means each owner holds a specified percentage of the property separately. When one owner dies, their share does not automatically transfer to the other owner.
Instead, the deceased owner’s share must go through probate, where a court determines who inherits based on the will or state intestacy laws. This can delay access to the property for months or even 12-18 months in complex cases.
Here is a real-world scenario: David and Michelle, a married couple, own their home as tenants in common with each spouse owning 50%. David dies unexpectedly. Michelle assumes the house is now entirely hers. However, legally she only owns her 50% share. David’s 50% must go through probate before Michelle can gain full ownership. If David had children from a previous marriage, those children may be entitled to part of David’s 50% share, creating a situation where Michelle co-owns her home with David’s adult children.
Tenancy by the Entirety
Tenancy by the entirety is a special ownership form available only to married couples in approximately half of all states. It treats the married couple as a single legal entity, with both spouses owning 100% of the property together rather than each owning 50%.
This ownership provides significant advantages. Neither spouse can sell, mortgage, or transfer the property without the other spouse’s consent. When one spouse dies, the surviving spouse automatically becomes the sole owner, avoiding probate. The property transfers immediately with only a death certificate needed at the county recorder’s office.
Tenancy by the entirety also offers strong creditor protection. Creditors of one spouse cannot attach the property or force its sale to recover debts unless both spouses consent. If one spouse dies before the creditor can collect, the surviving spouse takes ownership of the property free and clear of the deceased spouse’s individual debts.
The disadvantage is that tenancy by the entirety is only available in these states: Alaska, Arkansas, Delaware, Florida, Hawaii, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, and Wyoming.
| Ownership Type | Automatic Transfer | Probate Required | Creditor Protection | Tax Basis Step-Up |
|---|---|---|---|---|
| Joint Tenancy | Yes | No | No | 50% only |
| Tenants in Common | No | Yes | No | 50% only |
| Tenancy by Entirety | Yes | No | Yes (individual debts) | 50% only |
| Community Property | No (without WROS) | Yes | No | 100% in CP states |
| Community Property with Right of Survivorship | Yes | No | No | 100% |
Community Property and Community Property with Right of Survivorship
In the nine community property states, most assets acquired during marriage belong equally to both spouses. When one spouse dies, the surviving spouse automatically owns their 50% share. The deceased spouse’s 50% share passes according to their will or state intestacy laws.
Community property provides a significant tax advantage through 26 U.S.C. § 1014(b)(6). This section allows both halves of community property to receive a step-up in basis to fair market value at death. This means the entire property’s basis adjusts to current market value, not just the deceased spouse’s half.
Consider this comparison: Robert and Jennifer live in Texas (a community property state) and own a rental property worth $800,000 that they purchased for $200,000. If Robert dies, both Robert’s half and Jennifer’s half step up in basis to $800,000. Jennifer can sell the property immediately for $800,000 and owe zero capital gains tax. If they lived in Ohio (a common law state) and owned the property as joint tenants, only Robert’s half would step up to $400,000, leaving Jennifer’s half at the original $100,000 basis. When Jennifer sells for $800,000, she owes capital gains tax on $300,000 of gain ($400,000 – $100,000).
Some community property states allow couples to hold property as community property with right of survivorship. This combines the automatic transfer benefit of joint tenancy with the double step-up tax advantage of community property. When one spouse dies, the surviving spouse automatically receives full ownership without probate and the entire property receives a 100% step-up in basis.
What Happens When a Spouse Dies With a Will
A valid will controls how a deceased spouse’s property passes to beneficiaries. However, the will only affects property that the deceased spouse actually owned at death.
Property held in joint tenancy with right of survivorship or tenancy by the entirety passes automatically to the surviving co-owner regardless of what the will says. Retirement accounts and life insurance pass to the named beneficiaries on the beneficiary designation forms, not according to the will. Only property owned solely by the deceased or held as tenants in common goes through the will and probate process.
Spouse’s Inheritance Rights Under a Will
When a spouse creates a will leaving all assets to someone other than their spouse (such as children from a previous marriage), the surviving spouse still has legal protections in most states. These protections prevent complete disinheritance and ensure the surviving spouse receives a minimum share.
The elective share statute exists in 41 common law states and gives the surviving spouse the right to claim a portion of the deceased spouse’s estate even when the will leaves them nothing. The elective share typically ranges from one-third to one-half of the estate.
The surviving spouse must actively choose to claim the elective share, usually within six months of the spouse’s death. If they do not file the claim within the deadline, they receive only what the will provides.
Different states calculate the elective share differently. Some states apply the share only to probate assets. Other states, including those that adopted the Uniform Probate Code, calculate the share based on an “augmented estate” that includes probate assets, jointly held property, trusts, and other non-probate transfers.
Here is a concrete example: In Pennsylvania, Barbara’s husband Thomas dies with a will leaving his entire $900,000 estate to his children from his first marriage. Barbara and Thomas had been married for 15 years. Under Pennsylvania’s elective share law, Barbara has the right to claim one-third of Thomas’s estate, which equals $300,000. Barbara must file her election within six months of Thomas’s death. If she files on time, she receives $300,000 even though the will leaves her nothing. The children receive the remaining $600,000.
Omitted Spouse Statute
The omitted spouse statute protects surviving spouses when the deceased spouse created a will before the marriage and never updated it to include the new spouse. This situation commonly occurs when someone remarries later in life and forgets to revise their estate plan.
Under most omitted spouse statutes, the surviving spouse receives the share they would have received if the deceased had died without a will. This applies only when the omission was unintentional. The statute does not apply if the will clearly shows the testator intended to leave nothing to a future spouse or if the testator provided for the spouse through non-probate transfers.
Consider this scenario: Michael created a will in 2015 leaving all his assets to his adult daughter from his first marriage. In 2020, Michael married Sophia but never updated his will. Michael dies in 2023. Sophia qualifies as an omitted spouse because Michael’s 2015 will predates their marriage. Unless the will stated it would remain effective even after a future marriage, Sophia can claim her intestate share as if Michael had died without a will.
The omitted spouse’s share only comes from the portion of the estate not left to the deceased spouse’s children from before the marriage. If the will leaves everything to premarital children, the omitted spouse may receive nothing because no portion remains available for their claim.
What Happens When a Spouse Dies Without a Will
When a person dies without a valid will, the law calls this dying intestate. State intestacy laws determine who inherits the deceased person’s property. These laws vary significantly from state to state.
Intestate Succession Priority
Intestate succession laws establish a specific order of priority for distributing assets. The surviving spouse and children typically receive priority, followed by parents, siblings, and more distant relatives.
If the deceased has no surviving relatives, the assets may escheat to the state, meaning the state government takes ownership. However, this rarely happens because even distant relatives can inherit under intestacy laws.
Surviving Spouse’s Share in Intestate Succession
The surviving spouse’s intestate share depends on whether the deceased had children and whether those children are also the surviving spouse’s children.
In most states, if the deceased spouse had no children, the surviving spouse inherits the entire intestate estate. Some states give the surviving spouse everything even when children exist, if all the children are joint children of both spouses and the surviving spouse has no other children.
The distribution becomes more complex in blended family situations. When the deceased spouse has children from a previous relationship, most states divide the estate between the surviving spouse and those children.
Here are three common intestate distribution scenarios:
| Family Situation | Surviving Spouse’s Share | Children’s Share |
|---|---|---|
| Spouse, no children or parents | 100% of estate | None |
| Spouse + joint children only (no other children for either spouse) | 100% of estate | None |
| Spouse + deceased’s children from prior relationship | 1/3 to 1/2 of estate | 1/2 to 2/3 split among children |
State-Specific Intestacy Examples
Florida provides that if the deceased spouse is survived by descendants (children, grandchildren) who are all also descendants of the surviving spouse, and the surviving spouse has no other descendants, the surviving spouse inherits the entire intestate estate. If the deceased has descendants from a prior relationship, the surviving spouse receives half of the intestate estate.
Tennessee distributes the intestate estate between the spouse and descendants, with the spouse’s share being at least one-third. For example, if Bill dies intestate in Tennessee with $600,000 of probate assets, his wife Karen receives $200,000 (one-third), and his three children split the remaining $400,000, receiving $133,333 each.
California follows community property principles. The surviving spouse inherits all of the community property. For separate property, the spouse’s share depends on whether the deceased left children, parents, or siblings. If the deceased left one child, the spouse receives half of the separate property, and the child receives the other half. If the deceased left two or more children, the spouse receives one-third of the separate property, and the children split the remaining two-thirds.
Oklahoma has unique rules based on whether property was acquired through joint effort during the marriage. If the deceased leaves children not shared with the surviving spouse, the surviving spouse receives half of the property acquired by joint effort during the marriage plus an equal share of other property split proportionally with the children.
Which Assets Go Through Intestate Succession
Only certain assets are subject to intestate succession laws. Property that passes automatically to a surviving co-owner through right of survivorship avoids intestacy. Assets with named beneficiaries (life insurance, retirement accounts, transfer-on-death accounts) go directly to those beneficiaries.
Assets that do go through intestate succession include:
- Real estate owned solely by the deceased
- Bank accounts in the deceased’s name only
- Vehicles titled only in the deceased’s name
- Personal property (furniture, jewelry, artwork, collectibles)
- Business interests owned by the deceased
- Tenancy in common property interests
The Tax Consequences: Step-Up in Basis Rules
The step-up in basis rule under IRC § 1014 adjusts the cost basis of inherited property to its fair market value at the date of death. This rule creates significant tax savings by eliminating capital gains tax on appreciation that occurred during the deceased’s lifetime.
How Step-Up in Basis Works
When someone purchases property, their cost basis equals the purchase price plus improvement costs. If they later sell the property for more than the basis, they owe capital gains tax on the difference.
Without the step-up rule, inherited property would keep the original owner’s cost basis. Heirs would owe capital gains tax on decades of appreciation when they sell. The step-up rule eliminates this tax by resetting the basis to current market value.
Example: Jonathon purchased 80 acres of farmland in 1980 for $200,000. When Jonathon dies in 2024, the land is worth $1,000,000. Jonathon’s daughter Anna inherits the land. Anna’s basis becomes $1,000,000 (the value at death), not the $200,000 that Jonathon originally paid. If Anna sells the land immediately for $1,000,000, she owes zero capital gains tax because her basis equals the sale price.
Community Property Double Step-Up
IRC § 1014(b)(6) provides that in community property states, both the deceased spouse’s half and the surviving spouse’s half of community property receive a step-up in basis. This double step-up creates a major tax advantage for residents of community property states.
In common law states with joint tenancy ownership, only the deceased spouse’s half steps up in basis. The surviving spouse’s half retains its original basis, which means capital gains tax applies to the appreciation on that half when sold.
Compare these two scenarios:
Scenario 1 – Community Property State (Texas): Husband and wife bought a house in 1990 for $200,000. In 2024, the husband dies when the house is worth $900,000. The entire house receives a step-up to $900,000. The wife can sell for $900,000 immediately and owe zero capital gains tax.
Scenario 2 – Common Law State (Ohio): Husband and wife bought a house in 1990 for $200,000 as joint tenants. In 2024, the husband dies when the house is worth $900,000. Only the husband’s half steps up to $450,000. The wife’s half keeps the original $100,000 basis. The wife’s total basis is now $550,000 ($450,000 + $100,000). When the wife sells for $900,000, she owes capital gains tax on $350,000 of gain ($900,000 – $550,000).
This difference can cost $50,000 to $200,000 in unnecessary capital gains taxes on a single property.
Capital Gains Exclusion for Surviving Spouses
Federal law provides a $500,000 capital gains exclusion for married couples filing jointly when they sell their primary residence. Single individuals can exclude only $250,000.
Surviving spouses receive special treatment. If they sell the home within two years of their spouse’s death, they get the full $500,000 exclusion even though they are now single. This means a widow or widower selling within two years may owe no capital gains tax at all when combining the step-up in basis with the $500,000 exclusion.
If more than two years pass after the spouse’s death, the surviving spouse can exclude only $250,000. They still benefit from the step-up in basis, but the smaller exclusion means potential tax liability on larger gains.
Blended Families and Inherited Property
Blended families face unique challenges when a spouse dies. The deceased spouse may want to provide for the surviving spouse during their lifetime while ensuring children from a previous marriage ultimately inherit family property.
The Disinheritance Problem
The typical estate plan for first marriages is simple: everything goes to the surviving spouse when the first parent dies. This works well when both spouses share the same children. In blended families, this approach often leads to unintended disinheritance.
Here is what commonly happens: A husband and wife in a second marriage each have children from prior relationships. They create wills stating that upon the first death, everything goes to the surviving spouse. The husband dies first. His will leaves everything to his wife. She now owns all the assets. Years later, the wife can change her will to leave everything to only her biological children, completely cutting out her late husband’s children. The husband’s children receive nothing from their father’s estate.
According to estate planning attorneys, under almost all will-based plans, the biological children of the first spouse to die end up disinherited. The surviving spouse can legally change their will to exclude stepchildren at any time.
This problem becomes worse if the surviving spouse remarries. The new partner may influence the surviving spouse to cut out stepchildren entirely. After several years, emotional distance often grows between stepchildren and the surviving spouse, making disinheritance more likely.
Estate Planning Solutions for Blended Families
Separate Trusts Within a Joint Trust: Rather than using simple wills, blended families should create trusts that split into separate portions when the first spouse dies. Each spouse determines how their portion will be distributed, and the surviving spouse cannot change these instructions.
The joint trust contains three parts: Trust A for Spouse 1, Trust B for Spouse 2, and a Joint Trust for shared assets. Upon the first death, the deceased spouse’s trust becomes irrevocable. The surviving spouse receives income or limited principal access for support, but the remainder ultimately passes to the deceased spouse’s chosen beneficiaries (typically their biological children).
Life Estate: A life estate gives the surviving spouse the right to live in the family home until they die or remarry. When the life estate ends, ownership transfers to the deceased spouse’s children from their prior marriage.
The surviving spouse cannot sell the property or borrow against it without the children’s consent. This protects the home for the deceased spouse’s children while ensuring the surviving spouse has housing security.
Right of Occupancy Trust: This arrangement is similar to a life estate but provides more control. The trust owns the property, and the surviving spouse has the right to occupy it under specific conditions. The trust document specifies who pays property taxes, insurance, maintenance, and repairs.
Prenuptial Agreement: A prenuptial agreement can waive spousal inheritance rights. This ensures that each spouse’s separate property passes to their chosen beneficiaries (usually their children from prior marriages) rather than to the new spouse.
The agreement must be clear, in writing, and signed before marriage. Both parties should have independent legal counsel review the agreement. Courts will not enforce agreements that are unconscionable or signed under duress.
Retirement Accounts in Blended Families
Federal law (ERISA) requires that a married participant’s retirement account automatically go to their spouse unless the spouse provides written, notarized consent to a different beneficiary. This rule applies to 401(k) plans and other employer-sponsored retirement plans.
This creates problems in blended families. Even if a parent wants their retirement account to go to children from a prior marriage, they cannot designate those children as beneficiaries unless their current spouse signs a notarized consent form. If the spouse refuses to sign, the retirement account will go entirely to the spouse when the participant dies.
One solution is to segregate assets. The spouse with children from a prior marriage can direct other assets (the house, non-retirement investments, life insurance) to those children, while allowing the retirement account to go to the current spouse. This achieves a roughly fair division while complying with ERISA’s spousal protection rules.
Common Mistakes to Avoid
Mistake 1: Assuming Automatic Inheritance
Many people believe that when a spouse dies, the surviving spouse automatically inherits everything. This assumption is false in most states. Individual assets owned in the deceased spouse’s name do not automatically transfer. They can be divided between the surviving spouse and any living children according to intestacy laws.
The consequence of this mistake is delay and potential loss of assets. The surviving spouse cannot access solely-owned accounts or sell solely-titled property without going through probate. This process can take 12-18 months in complex cases.
Mistake 2: Wrong Property Title
Holding property as tenants in common instead of joint tenancy or tenancy by the entirety creates unnecessary probate. When the deed shows tenants in common ownership, the deceased spouse’s share must go through court proceedings.
The opposite mistake also happens. Some couples in second marriages hold all property jointly, thinking this simplifies matters. When the first spouse dies, the surviving spouse owns everything and can disinherit the deceased spouse’s children by changing their own estate plan.
The solution is to match the title to your goals. First marriages typically benefit from joint ownership with right of survivorship or tenancy by the entirety. Blended families should use careful planning with trusts and possibly tenants in common ownership for certain assets.
Mistake 3: Outdated Beneficiary Designations
Failing to update beneficiary designation forms after major life events (marriage, divorce, birth of children, death of a beneficiary) leads to unintended consequences. Beneficiary designations override the will. If your life insurance policy names your ex-spouse as beneficiary and you forget to change it after your divorce, your ex-spouse receives the entire death benefit even if your will leaves everything to your current spouse.
Review and update beneficiary forms every 3-5 years and immediately after divorce, marriage, birth, or death in the family. Ensure the forms match your overall estate plan.
Mistake 4: Commingling Inherited Property
When you receive an inheritance and immediately deposit it into a joint account or use it to pay off the mortgage on jointly-owned property, you risk losing its separate property status. Once commingled, the burden falls on you to prove which portion remains your separate property.
Keep inherited funds in a separate account in your name only. Document all transfers carefully. If you want to use inheritance funds for marital purposes, consult an attorney about how to preserve separate property status or accept that commingling will likely convert it to marital property.
Mistake 5: Not Considering State-Specific Rules
Moving from a community property state to a common law state (or vice versa) can change property ownership rules. Property that was community property in California may not automatically remain community property after you move to New York.
Some community property states (California, Idaho, Washington, Wisconsin) automatically convert property to community property when you move there and marry. Other community property states (Arizona, Louisiana, Nevada, New Mexico, Texas) require you to elect community property treatment.
The consequence is unexpected tax results and distribution outcomes. Always consult an attorney when relocating to understand how state law affects your property rights.
Mistake 6: Ignoring Probate for “Small” Estates
Some people assume probate is unnecessary for small estates. However, most states require probate for any solely-owned assets exceeding a minimum threshold (often $50,000-$150,000). Without probate, the surviving spouse cannot access bank accounts, sell real estate, or transfer vehicle titles.
The solution is to plan proactively. Use joint ownership with right of survivorship, transfer-on-death designations, and trusts to keep assets out of probate.
Mistake 7: Failing to Fund Trusts
Creating a trust but not transferring assets into the trust’s name renders the trust worthless. The trust controls only property that has been formally transferred to it. Property that remains in your individual name passes through probate and is subject to intestacy laws.
After creating a trust, immediately retitle real estate, bank accounts, and investment accounts into the trust’s name. Review periodically to ensure newly acquired assets get added to the trust.
Do’s and Don’ts for Protecting Inherited Property
Do’s
Do title property correctly from the start. In first marriages, hold real estate as tenancy by the entirety (if available in your state) or joint tenancy with right of survivorship. This avoids probate and provides creditor protection. In blended families, use trusts or careful titling to protect children from prior marriages.
Do update your estate plan after major life events. Review and revise wills, trusts, and beneficiary designations after marriage, divorce, birth of children, death of a beneficiary, or significant changes in asset values. An outdated plan often achieves the opposite of your intentions.
Do keep inherited property separate. Maintain inheritance funds in an account in your name only. Avoid commingling with marital assets. Document the source of funds if you later decide to use inheritance money for joint purposes.
Do understand your state’s community property vs. common law rules. If you live in a community property state, recognize the double step-up tax advantage and structure your ownership to maximize this benefit. If you live in a common law state, understand that separately titled property may not pass to your spouse automatically.
Do claim your elective share rights if disinherited. If your spouse’s will leaves you insufficient assets, research your state’s elective share statute and file within the deadline (typically 6 months). This gives you a legally protected minimum share even when the will attempts to disinherit you.
Do use professional appraisals for step-up in basis. Obtain a professional appraisal of real estate, business interests, and valuable personal property as of the date of death. This establishes the stepped-up basis for tax purposes and prevents disputes if the IRS questions your basis later.
Do coordinate beneficiary designations with your overall plan. Ensure life insurance, retirement accounts, and transfer-on-death accounts name beneficiaries consistent with your estate planning goals. Remember that beneficiary designations override your will.
Don’ts
Don’t assume title follows who paid for property. Legal title determines ownership, not who contributed money. If the deed shows tenants in common, that is how the court will treat the property regardless of who made the mortgage payments.
Don’t change separate property to joint property without understanding consequences. Adding your spouse’s name to your separately-owned property converts it to marital property in most states. This means they may have rights to half even if you later divorce or want to leave it to children from a prior marriage.
Don’t ignore homestead exemptions. Many states provide homestead exemptions that protect the family home for the surviving spouse. These exemptions continue even if the surviving spouse remarries in some states. Research your state’s homestead laws to maximize protection.
Don’t disinherit your spouse without using proper legal tools. Simply leaving your spouse out of your will may not work due to elective share statutes. If you truly want to leave assets to others instead of your spouse, use a prenuptial agreement with proper legal counsel.
Don’t wait until incapacity or death to organize documents. Create a comprehensive list of all assets, account numbers, passwords, and location of important documents. Share this information with your spouse, executor, or trustee so they can efficiently manage your affairs.
Don’t use only a will for blended family situations. Wills can be changed or lost, leaving biological children vulnerable to disinheritance. Use irrevocable trusts that split upon the first death to protect children from prior marriages.
Don’t name minor children as direct beneficiaries. Minors cannot legally own property. If you name a minor as a beneficiary without establishing a trust, the court will appoint a conservator to manage the funds until the child reaches age 18. This creates unnecessary legal expense and court supervision.
Don’t forget about ERISA’s spousal protection rules. If you have a 401(k) or employer pension and want it to go to someone other than your spouse (such as children from a prior marriage), you must obtain your spouse’s written, notarized consent. Otherwise, your spouse automatically receives the entire account regardless of your beneficiary designation form.
FAQs
Does a surviving spouse automatically inherit everything when their partner dies?
No. Automatic inheritance depends on how property was titled and whether the state follows community property or common law rules. Joint tenancy property and tenancy by the entirety property transfer automatically, but tenants in common property must go through probate.
Can I disinherit my spouse by leaving them out of my will?
No (in most states). Elective share statutes in 41 states allow the surviving spouse to claim one-third to one-half of the estate even if the will leaves them nothing. Proper disinheritance requires a prenuptial agreement or postnuptial agreement.
What happens to inherited property if my spouse and I divorce?
It depends on whether the property remained separate or became commingled. Inherited property kept in a separate account without mixing with marital funds usually remains separate property and is not divided in divorce. Commingled inherited property may become marital property subject to division.
Do I owe taxes when I inherit property from my deceased spouse?
No for federal estate tax in most cases. The unlimited marital deduction allows tax-free transfers between spouses. However, you may owe capital gains tax if you later sell inherited property and the gain exceeds the stepped-up basis.
What is community property and how does it affect inheritance?
Yes, it creates significant differences. Nine states recognize community property where both spouses equally own assets acquired during marriage. Community property receives a 100% step-up in basis at the first spouse’s death, while jointly-held property in common law states receives only a 50% step-up.
Can my spouse’s children from a prior marriage claim my house after my spouse dies?
Yes, in certain situations. If the house was your spouse’s separate property and their will leaves it to their children, you may have no claim to it. If it was community property or jointly owned, you retain at least your ownership share.
How long do I have to claim an elective share against my spouse’s will?
Six months in most states. The deadline typically runs from the date of death or the date the will is admitted to probate, whichever is later. Missing this deadline usually eliminates your right to claim the elective share.
What happens if my spouse dies without updating their will from before we married?
You qualify as an omitted spouse in most states. The omitted spouse statute gives you the share you would have received if your spouse died without a will, unless the will clearly shows your spouse intended to disinherit you.
Do retirement accounts go to the spouse even if someone else is named as beneficiary?
Yes for ERISA-governed accounts like 401(k) plans. Federal law requires that the spouse automatically receive the account unless they sign a notarized consent to a different beneficiary. This rule does not apply to IRAs, which can go to non-spouse beneficiaries without spousal consent.
Should I hold property as joint tenants or tenants in common with my spouse?
Joint tenancy is usually better for first marriages because it avoids probate and provides automatic transfer. Tenants in common may be preferable in second marriages when you want your share to go to your children from a prior marriage.
What is the step-up in basis and why does it matter?
Step-up in basis adjusts inherited property’s cost basis to fair market value at death, eliminating capital gains tax on lifetime appreciation. This can save tens or hundreds of thousands in taxes when property is sold.
Can my spouse sell property I inherited from my parents if we own it jointly?
Yes, if you added your spouse to the title as a joint owner. Once property becomes jointly owned, either owner can typically sell or encumber their interest. To protect inherited property, keep it titled only in your name.
What is tenancy by the entirety and is it available in my state?
Tenancy by entirety is a special married-couple-only ownership that provides creditor protection and automatic transfer at death. It is available in approximately 25 states including Florida, Pennsylvania, New York, and Michigan. Check your state’s specific laws with an attorney.
How do I prove property is my separate inheritance and not marital property?
You must provide documentation showing you inherited the property and kept it separate from marital assets. Maintain bank statements, inheritance documents, and a clear paper trail showing no commingling. The burden of proof is on the person claiming separate property status.
What happens to a house owned as tenants in common when one spouse dies?
Probate is required to transfer the deceased spouse’s share. The share passes according to the will or intestacy laws, potentially to children or other relatives instead of the surviving spouse. The surviving spouse owns only their original share until probate completes.
Can a prenuptial agreement prevent my spouse from inheriting my property?
Yes, if properly drafted. A prenup can waive the spouse’s right to an elective share and their intestate share. Both parties need independent legal counsel, and the agreement must be signed before the wedding.
Do I get the house if my spouse dies and we both owned it?
It depends on the title. Joint tenancy with right of survivorship or tenancy by the entirety gives you automatic ownership. Tenants in common requires probate to transfer your spouse’s share, which may go to their children or relatives.
How do blended families protect children from prior marriages?
Use trusts that become irrevocable upon the first death. A/B trusts, marital trusts with limitations on the surviving spouse’s access, and life estates can ensure children from prior marriages ultimately receive their parent’s assets.
What is a life estate and how does it work when a spouse dies?
A life estate gives the surviving spouse the right to live in the home for their lifetime, but ownership ultimately passes to other beneficiaries (often the deceased spouse’s children from a prior marriage) when the life tenant dies or remarries.
Can I change the beneficiary on my spouse’s life insurance policy?
No. Only the policy owner can change beneficiaries. If your spouse named someone else as beneficiary and then dies, that beneficiary receives the proceeds regardless of what you want. This is why regularly updating beneficiary designations is critical.
Related reading
- Does Community Property Have Right of Survivorship? (w/Examples) + FAQs
- What Happens if You Inherit a Property? (w/Examples) + FAQs
- What Happens When Someone Dies in a Tenancy in Common (w/Examples) + FAQs
- Does a Surviving Spouse Inherit Everything? (w/Examples) + FAQs
- What Are The California Inheritance Rules? (w/Examples) + FAQs
- Who Is Entitled to Inheritance If There Is No Will? (w/Examples) + FAQs
- Is It Better to Inherit Money or Property? (w/Examples) + FAQs