Yes, but more for ban purposes than anything else. It really sucks owning a lot of land and then getting permanent bannination and having all that land go public. It should at least go to a partner or something pending their tiering up to accomodate and sell it or re-develop it.
Frankly Banning is a lot more common than a lot of people realize. This is the truest kind of sudden or unexpected "death" a SL resident can have, and even people sentenced the death penelty in the US get to decide what happens to their property. Why should SL be different?