What Is A Laughing Heir And Do I Have One?

Laughing Heirs

You have probably heard people joke about wishing they had a long, lost great uncle who would leave a huge inheritance upon his passing. Basically, they were wishing to become a laughing heir, and it happens more often than you might think. But, the heir may not be an uncle at all.

The legal definition is:

a distant relative of an intestate decedent who takes under the applicable intestacy statutes but who did not expect to inherit. This heir is said to “laugh all the way to the bank” because the heir often does not even know the decedent.

Many states establish statutes to limit the degree of separation a laughing heir can have from the deceased. For example, in some states, like Alabama, inheritance extends only to the descendants of the grandparents of the deceased. While other states, like North Carolina, extend inheritance indefinitely until a relation is found.

Inheritance After Divorce

However, in the event of divorce, an ex-spouse might find him or herself in the position to receive benefit when that would not have been the wish of the decedent. Similarly to the state-established statutes limiting the extension of blood relation inheritance, some states also have statutes revoking beneficiary designation upon divorce. If, for example, a wife fails to change her life insurance beneficiary designation upon divorce and later dies, some states will revoke the designation and award the benefit to her children or next of kin. Until recently, the validity of those statutes was in question.

In June, the United States Supreme Court ruled in the case of Sveen v. Melin upholding the states’ rights to enact statutes which revoke beneficiary designation upon divorce. That is good news for the states who already have statutes on the books.

What the Ruling Means in West Virginia

West Virginia does not have a statute revoking designations. That means, at present, an ex-spouse could become a laughing heir if beneficiary designations have not been changed. The key takeaway for WV residents is to make sure beneficiary designations are up to date. Considering the Supreme Court ruling, the WV legislature may establish a similar revocation statute, but that has not occurred yet.

Regardless of who your heirs are or your state of residence, the best course of action is to see an estate planning attorney to ensure no one is laughing their way to the bank after you’re gone.