Don’t “Escheat” Your Family Inheritance

Nearly 2.5 million Americans died last year, many without signing a will. One of them was apparently Roman Blum, a Holocaust survivor and New York real estate developer who was worth almost $40 million when he passed away in January 2012 at the age of 97 … If, after three years, there’s still no sign of his doing any estate planning and no one comes forward to claim his assets, all that money will go to New York State, under a legal rule called escheat.

Estate planning is not a do-it-yourself endeavor; there are plenty of opportunities to make costly mistakes. The biggest mistake is having no estate plan. Why? Because your life’s work may escheat to your state’s treasury by default.

At the very least, a proper will can avoid legal landmines like the escheat rule.

Escheat is the principle that there is no such thing as estate-limbo. Basically, an estate can sit in limbo for only so long before it gets swallowed up by the state where the decedent last resided. Consider the case of Roman Blum in New York, as reported in a recent Forbes article titled “N.Y. State Could Get $40 Million From Man Who Died Without A Will.” You can read all of the details in the original article, but Mr. Blum likely did not intend the State of New York to benefit from his life’s work as a real estate developer.

Here are the lessons to take away from this case:

1. Plan for your loved ones. If you don’t make at least a basic will, your state’s laws of intestacy may apply. To see what would happen in your state, visit the free, interactive website mystatewill.com.
2. Review beneficiary forms. Many assets are transferred via designations on beneficiary forms – from your retirement accounts to life insurance and even bank accounts. Review these forms regularly, and be sure to keep them up-to-date.
3. Benefit charities. Some people refer to this as the “bomb” clause, stating that should your entire family be wiped out in a single incident, your assets should be distributed to specific charities.
4. Sign documents to protect yourself. Someone needs to make important decisions for you when you cannot do so for yourself. With legal documents like health care directives and powers of attorney you can appoint those you must trust to act on your behalf.
5. Make documents accessible. Make sure your legal documents can be found. It won’t matter how many documents you’ve signed if no one can find them!
6. Don’t procrastinate. Apparently, when Mr. Blum was ailing, he had finally agreed to sign the necessary documents, but passed away before getting it done.

Reference: Forbes (April 28, 2013) “N.Y. State Could Get $40 Million From Man Who Died Without A Will”