This is a very common question and one to which the Scriptures give much attention. First, let me state some answers that I believe are false and which find no true support from Scripture…
> Soul Sleep. There are a few religious groups today which teach a doctrine known as “soul sleep” in which a believer who dies simply “sleeps” or fades totally from consciousness until the final judgment.
> Pergatory. Roman Catholicism teaches that a person may go to this state of limbo in between heaven and hell. In Pergatory, a person may suffer for their sin until it is paid for, or others may pray for their forgiveness as well. Obviously this violates the Bible’s teaching that this life is the only opportunity we have to make things right with God. It also inserts a doctrine where none is found in all of Scripture, as well as diminishing the all-sufficient, finished work of Christ on the cross by assuming that our suffering is a necessary supplement to His atoning death.
> Annihilation. Jehovah’s Witnesses, among others, teach that a person simply ceases to exist upon death if they are not a faithful witness of Jehovah. You might say that this is the viewpoint of the atheist and the agnostic as well who do not believe in an afterlife.
> Heaven (with streets of gold) or Hell (the lake of fire). Many believe, because of humanistic sentimentalism that either everyone who dies today immediately walks streets of gold or that some go to heaven and some go to hell forever upon death. While there is an element of truth here, this is not the teaching of Scripture either.
So what happens to a person when they die today? Though Bible-believing men may differ on the details, the Bible’s basic teaching is that a believer’s soul is immediately in the presence of Jesus upon separation from the earthly body at death, while the physical body returns to the dust from which it was formed (Ecclesiastes 12:7). As Paul said, “We are confident, I say, and willing rather to be absent from the body, and to be present with the Lord.” (2 Cor. 5:8).
However, being in the presence of Jesus is not the equivalent of being in heaven in the eternal sense, for Peter declared, “Nevertheless we, according to his promise, look for new heavens and a new earth, wherein dwelleth righteousness.” (2 Peter 3:13) A believer who dies is consciously and immediately in the presence of Jesus in paradise, but waits for a final resurrection and judgment (at the judgment seat of Christ, see 1 Cor. 3:11-15) to enjoy the final and eternal heaven with streets of gold.
For the nonbeliever, the body returns to dust and the soul departs to hell, or the grave, a holding place (like a prison) to await a final judgment of his works where he will someday be sentenced to eternity in the lake of fire. (see Revelation 20:11-15). Though the lake of fire is yet to come, hell today is a place of conscious suffering, darkness, and loneliness. Further it is a place where people understand that they are lost eternally and wish that they could witness to their loved ones left behind.
Jesus told a story (not a parable, as individuals are not named in parables) in Luke 16:19-31 about a rich man and a poor man, each of whom died. Jesus said of the rich man, “in hell, he lifted up his eyes, being in torments…” Jesus further described the rich man as wishing that he could send Lazarus, the poor man, back from the grave to witness to his brothers. The finality of death and lack of ability to change our minds after death is apparent from Jesus’ story.