One of the most common concerns I hear is “I don’t want the state to end up with my money.” Fortunately, that scenario almost never happens.
Money only escheats (reverts back) to the State when you do not have any heirs that could inherit your estate. Even if you don’t have children or parents or brothers or sisters, the vast majority of us have a long-lost uncle or third cousin somewhere.
There was a Holocaust survivor in New York who died without creating a will. He was a millionaire. The state of New York spent thousands of dollars searching for a relative in Europe who may have survived him. States can go to great lengths searching for an heir.
So if you know there is a person in your bloodline somewhere, don’t be concerned about the state getting your money when you die.
Another common concern I hear is “I don’t want my kids to pay death taxes.” Again, have no fear —unless you have $5.45 million, or you are married and have $10.9 million, when you die. (If you do, your family will pay 40% in federal death taxes OVER those amounts.) Arizona does not have a state death tax either. By the way, tell your kids not to live in New Jersey. New Jersey has a state death tax that starts when there are assets more than $675,000 AND an inheritance tax on any money inherited.
So can your children avoid paying all taxes? No! Your children, for example, will still need to pay income taxes on retirement distributions and capital gains on real property just to name a few. If there was a tax you would have had to pay if you were alive, your heirs will have to pay it as well. As Benjamin Franklin once said, “In this world nothing can be said to be certain, except death and taxes.”
You may also like: Where Not to Die in 2016 on Forbes.com