Escheatment

What Is Escheatment?

Escheatment is the legal process that occurs when assets, such as abandoned bank accounts or unclaimed property, are turned over to the state.

This turn-over can happen when the owner has not interacted with the property for a certain amount of time and cannot be located.

The state then becomes the legal owner of the property. If the original owner or his heirs wishes to reclaim the property, they may file a claim to get it back.

Escheatment laws vary by state. Since each person has a right to own assets, it is up to the state to provide clear guidelines on how to treat abandoned property.

The Escheatment Process

All financial institutions are required by law to report any abandoned property after a waiting period.

However, before reporting the abandonment, the institution must make a sustained effort to find the property owner..

It is the institution’s responsibility to report abandoned property if they are unable to find the owner and if it remains unclaimed, after the amount of time mandated by the state.

When a property is reported as abandoned, the state has the right to take ownership.

An accounting entry is created to track the abandoned property. Then, the property is sold, and the proceeds become state funds.

If the original owner wants to reclaim the property, they are required to fill out a form and submit their personal information.

If ownership is verified, claimants are usually given the cash equivalent of the property’s previous value during the time when it was claimed by the state.

Escheatment of Unclaimed Property

When an apartment is abandoned, any property left behind becomes the landlord’s responsibility. The landlord must make every effort to return the property to its rightful owner.

In the meantime, the former tenant will be charged for storage space.

Failure to reclaim the property within a specific period may result in it being turned over to the police department.

The police department will try to locate the owner as well. However, if the owner of the goods still remains unfound, the landlord is eventually given full ownership of the property.

Escheatment Laws for Abandoned Bank Accounts

If an individual leaves an account or a similar financial asset abandoned for a certain number of years, the financial institution has the right to take ownership of it.

However, the institution must make diligent efforts to find the owner before it can start the escheatment process.

Financial institutions can track down property owners with the help of the National Association of Unclaimed Property and other similar groups.

Organizations like these are usually connected with the government and adhere to escheatment laws.

Some states also impose a statute of limitations that sets a time limit on how long someone can make a legal claim on financial assets. This condition makes these assets less recoverable over time.

Escheatment Laws by State

Each state has its own timeline on when specific assets can be considered as abandoned and therefore eligible for escheatment.

Below is a list of some common assets with the specified time indicated per state.

How to Avoid Escheatment

There are a few things you can do to avoid having your property turned over to the state:

Regularly Check Your Accounts

Keep track of all your financial assets, including bank accounts, investments, retirement accounts, and insurance policies.

Keep a list of all your account numbers. Also, note down the name and contact information for each financial institution.

Cash In Your Dividend Checks

If you have a dividend check that remains unclaimed, cash it in as soon as possible.

The same goes for any other type of checks, such as a refund or an insurance pay-out. Failure to do so may result in the state taking ownership of the money.

Vote by Proxy

Proxy voting is an excellent way to participate in a company's annual shareholder meeting, even if you cannot attend in person.

By filling out a proxy form or card, you can demonstrate that you remain engaged with the company and are not relinquishing your stock ownership.

In certain cases, financial institutions may also require proxy voting to ensure that you have not abandoned your account.

Regularly Update Your Information

Ensure that your financial institutions have access to your latest contact information, such as your mailing address, email address, and phone number.

Doing this can help prevent your accounts from ending up in escheatment.

The Bottom Line

Escheatment is the process of turning over abandoned property to the state.

This proceeding usually occurs when assets remain unclaimed or abandoned, even after diligent efforts have been made to locate their rightful owners.

Guidelines on how to treat abandoned property vary by state. For instance, some states impose a statute of limitations that limits how long someone can make a legal claim on escheated financial assets.

It is crucial for individuals to be aware of these differences so that they can protect themselves and their property.

To avoid escheatment, individuals are also encouraged to keep track of all their accounts, cash in their dividend checks, vote by proxy, and regularly update their contact information.

By understanding escheatment and taking the necessary steps to avoid it, you can ensure that your property does not end up in the hands of the state.