What Happens to Money After You Die?

The sudden death of rock star Prince at age 57 was a shock to his legions of fans. But weeks after his April death the status of his $300 million estate remains in limbo, with hundreds of people -- even a prisoner in Colorado -- vying for a slice of the musician's net worth.

So far, nobody has found a will indicating how Prince's estate should be divvied up.

"It becomes a complicated mess," when someone dies without a will, says Bill Van Sant, senior vice president and managing director at Girard Partners, headquartered in King of Prussia, Pennsylvania.

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While the spotlight on and scale of the Prince estate may be unusual, the situation isn't. A 2014 survey from online legal-services company Rocket Lawyer and Harris Poll found that 64 percent of Americans don't have a will.

But it's arguably better to plan ahead while you're in sound mind and body to make things easier on grieving relatives when they're at the height of bereavement. "Advance planning is key," says Adelina Kieffer, senior vice president at Pennsylvania-based Bryn Mawr Trust.

Here's a look at what happens to assets, including stock and bond portfolios, after an investor dies.

No plan and no claim. If there is no estate plan in place and nobody claims the assets for a number of years, they go to the state in process called escheatment, says John B. Burke, founder of Burke Financial Strategies in Iselin, New Jersey.

If heirs, such as the next of kin, come forward to make claims on the assets, that stops the escheatment process, but it can be the start of a lot of work for the heirs if there isn't a will.

Without a will, a state will appoint an administrator to oversee the gathering of assets, the paying off of creditors and the disbursement to beneficiaries in a certain order, Kieffer says.

A will means probate. If a person does have a will, assets enter the probate process.

After someone dies, a would-be executor goes to the courthouse in the area where the person lived, shows the will naming them as the executor and the death certificate and is declared the executor, Van Sant says.

An executor is responsible for gathering assets, dealing with taxes on them and making sure they're distributed according to the will. That can include selling securities. "You really have to trust this person," Van Sant says.

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One key to note is that executorship is not the same as power of attorney. The latter, which may have been entered into when taking care of an ailing parent's medical and financial needs, ends on death, Van Sant says.

There may be beneficiaries. Some assets such as a retirement account, bank account, annuities, insurance or a brokerage account don't have to go through the probate process, as long as a beneficiary is named. For a brokerage account, you can request a transfer-on-death form and name a beneficiary there. Joint ownership of accounts can be another way of avoid the probate process.

Because the beneficiary designation trumps what's in the will, it's important that they match up, Kieffer says. It's always good to go back and look at beneficiary designations when there is a life event such as a divorce.

Without beneficiaries named, the assets would be thrown together with the rest of the estate in the probate process.

Make your plans known. Don't have post-death documents drawn up in a vaccuum, Van Sant says. Tell all your family members what you're doing and ask the person you want to be your executor whether its a responsibility they are OK with handling.

While a simple will is fine if heirs get along, if there is a worry about fighting among heirs, then a person can have their wishes spelled out in a trust, Burke says.

Burke recommends clients create a list of assets with an associated phone number and their wishes for the assets after their death. That makes it easier at a time when children are in mourning or helping out the remaining elderly parent.

To help smooth the process, Burke recommends starting with a financial planner to get organized and find the most efficient and cost effective way to implement someone's plans.

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Inevitably, an attorney will have to be hired to actually write a will or trust, but to begin with, financial planners will be cheaper source of advice than a lawyer.

Matt Whittaker is a journalist specializing in natural resources coverage whose work has appeared in The Wall Street Journal, Barron's and other international publications. He has reported from the Americas, Europe and Asia. Follow him on Twitter @mattswhittaker.