The rules of inheritance are set according to state law. Each state has its own statutes that explain which relatives have priority and how much inheritance they are are entitled to receive. These statutes, known as "laws of intestate succession," differ from state to state. However, there is a priority of heirs common in many state statutes.
Intestate Vs. Testate
Certain rules apply when an individual dies with a will or without one. A person dies without a valid will is said to have died intestate; a person who dies with a valid will is said to have died testate. Although state laws differ regarding wills, most require a person to be at least 18 years of age and capable of understanding the effect of making a will. Most states allow parents to disinherit their children in a will, if they so choose. However, a married person may not usually disinherit her spouse, unless her spouse agreed to forfeit his right to inheritance via a prenuptial agreement.
Spouses, Children and Grandchildren
Surviving spouses are typically given priority under intestate succession laws. Generally, if someone dies married and has no surviving children, her surviving spouse inherits her whole estate. It's also a common rule for children to receive all of their deceased parent's estate if their parent was unmarried at the time of her death. Typically if someone leaves both a surviving spouse and children, they share the estate, although the proportions of the inheritances vary among states. Grandchildren have inheritance rights under certain circumstances. For example, it's common for state laws to give grandchildren a portion of their grandparent's estate if their parent is deceased -- in other words, grandchildren may inherit their deceased parent's share.
Most intestate laws grant a portion of a deceased person's estate to her parents; in some instances, parents may inherit all of their child's estate. For example, it's common for parents to receive all of their child's estate if their child was unmarried and had no children or grandchildren at the time of death. It's also common for surviving parents to receive a portion of their child's estate if their child was married but had no children or grandchildren.
Other Collateral Heirs
Siblings, cousins, nephews and nieces are considered "collateral heirs." (see Collateral heirs are relatives that are neither a spouse nor a direct descendent of a deceased person. Generally, siblings inherit a portion of a deceased sibling's estate only if the decedent had no living children, grandchildren, spouse or parents at the time of death. Furthermore, neices and nephews generally only inherit from aunts or uncles if their parents would have been entitled to a share but are deceased.