What happens to assets of the individual business-owner if he or she dies without an estate plan, ignoring expenses and taxes for the moment?

The State of California has a law called “intestate succession”. Under this law, the decedent’s assets will be distributed through the California Probate Court. The Court appoints a personal representative (called an administrator) and guardians for minor children are appointed according to the state law order of preference.

If the decedent was not married, the decedent’s property is distributed (in order):

1. Descendants
2. Parents
3. Siblings or descendants of deceased siblings (nieces and nephews)
4. Grandparents or descendants of deceased grandparents (cousins)
5. Descendants of a predeceased spouse
6. Next of kin
7. Parents of predeceased spouse
8. Descendants of parents of predeceased spouse

If the decedent was married, community property passes to the surviving spouse.

If the decedent was married or had a domestic partner (DP) AND:

1. Was not survived by descendants, a parent, sibling or a niece or nephew, all of the separate property passes to the surviving spouse or domestic partner.

2. Was survived by children/descendants, parent, sibling, niece or nephew, then the SP passes to the surviving spouse or domestic partner and the surviving children or relatives (with the amounts depending on who survives the decedent).

Is this a desirable plan? Not if the individual wants to leave a thoughtful legacy for his or her family; achieve protection from divorce, creditors and future litigation; and minimize taxes and expenses.