Q: How do I keep the state from taking everything after I die?
A: I’m not entirely sure what you are asking. You might be asking how you keep all of your property from being transferred to the state after your death, or you might be asking how to limit taxation on your estate. In either case, don’t let your concerns keep you up at night.
When a person dies without an estate plan and without any blood relatives, the state can acquire the decedent’s property. The term for this is escheat or escheating.
Can I tell you that escheating never happens? No. However, I will tell you that it almost never happens. I was admitted to the Indiana bar in 1993 and in my 25 years of working in estate planning and settlement, I have never seen it happen.
The reason is pretty simple; everyone has family. Maybe you don’t have children or siblings, but you very likely have cousins or second or third or even fourth cousins. In order for your property to escheat to the state, you literally have to die without any identifiable family, no matter how remote.
I can’t tell you that escheating never happens. I’m sure it has and will continue to happen on occasion. However, it’s so unlikely that you shouldn’t let it concern you. Also, even if you are the rare individual who is the end the family line, the solution is simple; create an estate plan. If you leave an estate plan, your property won’t go to the state, even if you have no blood relatives.
Now, if your concerns aren’t about escheating, but rather taxation, I have some good news for you, too. Death taxes aren’t nearly the concern that they were five years ago.
In 2013, Indiana did away with its inheritance tax. When I was first admitted to the bar, the inheritance tax was what hit my clients the hardest. At that time, I think children started paying inheritance tax after the first $25,000. Now, there is no inheritance tax on the estates of decedents who died after Jan. 1, 2013.
Unfortunately, the federal estate tax is still around. However, the new tax law doubled the excludable amount to more than $11 million for individuals and nearly $22.5 million for married couples. Assuming that your estate or the estates of you and your spouse are less than those amounts, it’s unlikely that you will owe any federal estate tax.
Your concern that the state will take everything is probably unwarranted. With just a little planning, escheating and tax issues should be avoidable. I can’t tell you that there absolutely won’t be any issues, but it’s really unlikely. So sleep well tonight, the state isn’t coming for your stuff.