Earlier this year, an unexpected $7 billion windfall fell into the lap of the U.S. Treasury. But who would leave behind such a large sum, and how could something like this happen? The reality is both a surprising and cautionary tale about estate planning, especially for those with significant assets.

A Windfall to the U.S. Treasury

When someone dies without a Will or estate plan, their assets might be left unclaimed. In these cases, if there are no relatives or beneficiaries to take ownership, the money could eventually go to the government, a scenario known as “escheatment.” While details of the individual and/or family involved in this latest situation are still unfolding, it’s clear that this staggering $7 billion gift was not necessarily intentional. It serves as a reminder of the importance of clear, effective estate planning.

Why Estate Planning Is Essential

Estate planning isn’t just for the ultra-wealthy. Even though this example highlights a large estate, every estate, regardless of its size, deserves a thoughtful, well-executed plan. When someone fails to establish a Will or Trust, they risk leaving their loved ones, and potentially the government, in charge of deciding how their assets are distributed.

For example, if you have specific desires for how your wealth should benefit future generations, support charities, or preserve family heirlooms, these wishes must be documented to be fulfilled. Without them, there is no guarantee that your wishes will be honored.

What can we learn from this high-profile example?

Don’t Procrastinate: Many people delay estate planning, believing they have plenty of time to get their affairs in order. However, life is unpredictable. The sooner you set up a comprehensive plan, the better protected your assets and loved ones will be.

Review and Update Regularly: It’s not enough to create an estate plan once and never look at it again. Circumstances change, but regularly revisiting your estate plan helps ensure that it remains aligned with your current wishes.

Utilize Trusts for Privacy: Trusts can be an excellent tool for managing and distributing your assets privately. Unlike Wills, which become public records during the probate process, Trusts can provide your family with privacy and efficiency.

Designate Beneficiaries Thoughtfully: Make sure to designate beneficiaries on accounts like retirement funds, insurance policies, and investment portfolios. It’s crucial to keep these designations up to date, as they often take precedence over what’s in your Will.

The Role of Estate Taxes and Government Involvement

One of the fascinating aspects of this $7 billion story is how the estate tax laws intersect with unclaimed estates. In the U.S., estate taxes apply to wealth transfers above a certain threshold. For 2024, that threshold is set at $12.92 million per individual or $25.84 million for married couples. If a high-net-worth individual passes away without adequate tax planning, a significant portion of their estate could be lost to taxes, or in rare cases, like this one, completely claimed by the government.

Planning with an estate attorney can help mitigate these tax burdens. Options like charitable giving, setting up tax-efficient Trusts, or taking advantage of tax exemptions can safeguard your wealth and direct it to the people and causes you care about most.

Securing Your Legacy

Whether your estate is modest or substantial, making your wishes known and legally enforceable is critical.

A well-crafted estate plan does more than distribute assets. It preserves your legacy, minimizes stress for your loved ones, and reduces potential losses to taxes. The process may seem daunting, but working with a skilled estate planning attorney can make it manageable and tailored to your unique needs.

If you are interested in learning more about charitable giving, Trust administration or getting started on your first estate plan, please contact us today. Our firm will guide you in all stages of the preparation process, from reviewing your assets to discussing your estate planning goals, to drafting a plan that accurately reflects your wishes!