Final answer:
If you die without a valid will, your state's intestacy laws will determine how your estate is distributed, not the federal court or IRS. A will expresses your asset distribution wishes but must meet legal standards to be valid, whereas a trust is a private tool for transferring assets.
Step-by-step explanation:
If you die without a valid will, your estate will be distributed according to your state’s intestacy laws, which dictate the hierarchy of relatives who will receive your assets. This process is managed by the courts, and the specific rules vary from state to state but generally follow a common order of spouse, children, parents, siblings, and so on. The federal court is not involved in this process, and while a letter of last instruction may provide guidance for your loved ones, it does not serve as a legal will. The IRS does not confiscate your property; however, the estate could be subject to estate taxes depending on its value.
A will is a document expressing an individual’s wishes regarding asset distribution, but it must meet certain legal standards to be considered valid, otherwise, the state decides. On the other hand, a trust is a private estate planning tool that helps facilitate the transfer of assets outside of probate court, often becoming irrevocable upon death.
It's important to note that while estate planning can influence who inherits your property, items such as a living will or DNR order pertain to medical decisions and do not affect the distribution of assets after death.