Corporate Law Blog

Where There's a Will, There's a Way. Where There's No Will, There's Escheatment

Recently, an estate planning failure of epic proportions made national headlines. Roman Blum, a Holocaust survivor and successful real estate developer, died without a will and no legal heirs. This scenario happens from time to time, but there is a twist to this story: Mr. Blum left behind an estate worth $40 million dollars. At the time of his death, he was divorced with no children and no known relatives.

When an individual dies without a will, it is known as dying "intestate." Each state has intestacy laws which dictate how assets will be divided among heirs when a will is not available to provide for the distribution of assets. For instance, in Kentucky, if a single man with two children dies without a will, then his children will inherit the estate. A unique problem arises, however, when heirs cannot be found. When the administrator of an estate cannot locate heirs and none come forward, then the escheatment process begins. Escheatment is the process by which a state takes ownership of property, whether real or personal, that is believed to be abandoned or unclaimed.

Mr. Blum's gaffe is not typical, as most individuals with estates of that magnitude have an estate plan and will in place; but there are many times property is escheated. For instance, uncashed payroll checks, gift cards, or property left in storage facilities are all "property" that can escheat to the state.

Kentucky's escheatment laws are found in KRS §393. Under the statute,

[A]ny property having a situs in this state that has been devised or bequeathed to any person and is not claimed by that person or by his heirs, distributees, or devisees within three (3) years after the death of the testator, or if the owner of any property having a situs in this state dies without heirs or distributees entitled to it and without disposing of it by will, it shall vest in the state.

KRS §393.020

Once the property vests, it is liquidated, and the proceeds (minus costs, fees, and expenses incidental to the legal proceedings of the liquidation) are paid to the Kentucky Department of the Treasury. In the case of Mr. Blum, his assets are being liquidated and whatever money is received will go to the New York Department of Finance. Indeed, escheatment laws can translate into a windfall for states every now and then, though rarely to the tune of millions.

There are specific provisions relating to numerous types of assets, such as bank accounts, insurance policies, and safety deposits. It is necessary to check the statutes to see if any special rules apply to a particular asset.

Under KRS §393.140, even after property has been surrendered or paid to the state, a person may still come forward with a claim to the property, provided certain conditions apply. The State Treasurer hears such claims. If the claimant establishes his claim to the property, the State Treasurer is required to authorize payment to the claimant in a sum equal to the amount paid into the State Treasury.

If you want to protect your assets and choose to whom they should pass, then make sure you take the necessary steps to plan for the distribution you intended. If you would like assistance with estate planning or creating a will, contact the attorneys at McBrayer PLLC. We can help make sure your loved ones don't get cheated through escheatment.