Final answer:
If someone dies without a will, the estate is distributed according to state laws of descent and distribution, prioritizing closest relatives and finally escheating to the government if no heirs exist. Wills and trusts are important tools to direct asset distribution, while inheritance taxes only affect large estates.
Step-by-step explanation:
When someone dies without a will, they are said to have died intestate. In this situation, assets are distributed according to the state laws of descent and distribution. These laws define a hierarchy of who should inherit the estate, typically starting with the closest relatives like spouses and children, and proceeding to more distant relatives if no immediate family is found. If no heirs are discovered through this process, the estate then escheats which means it can be claimed by the government.
The absence of a will can complicate the transfer of assets, as there is no clear directive from the deceased. This underscores the importance of drafting a will or establishing a trust. A will is a public document that expresses the disposition of a person's assets after their death, while a trust allows for a private transfer outside of the probate court and becomes irrevocable upon death.
Issues surrounding inheritance taxes are often debated. The estate tax in the United States is designed to limit inheritance to some extent, but according to the 2015 data, it affects only those passing on assets exceeding $5.43 million. Therefore, it impacts a very small percentage of the wealthy population.