Escheatment is the process by which a state government assumes ownership of unclaimed or abandoned accounts. Its intended purpose was to help handle situations in which the owner of an account had died and had no heirs or beneficiaries – but it has evolved into something more complicated. After a specified period of inactivity, which for many states is only five or even three years, the state government can then use this unclaimed money towards their own budget, which is particularly appealing for states in a financial bind.

Escheatment isn’t Rare

Escheatment happens on more occasions than you might think. There are a number of ways in which an account can become abandoned. Uncashed checks, a lack of communication with your financial institution for your state’s defined period of time, failing to respond to a proxy statement – all can lead to what a state considers “abandonment”.

A financial institution should contact you should any of your accounts reach this abandonment status, but that contact may simply be in the form of one letter. Should your address not have been updated, or should you not open the letter, then the escheatment process will begin. Some states put an ad in local newspapers reminding people that they “may have unclaimed property” and count that as contact!

States can find out about abandoned accounts in a couple of ways: either through an audit or through the yearly filing from the financial institution holding the account. In turn, this has created an industry of auditing firms that work to find abandoned accounts, then keep a percentage of what the property once it’s been converted to state revenue.

Getting Your Money Back

Once you realize assets of yours have been escheated, the ease at which you can get those funds back will depend on the state. No matter what the state, you’ll have to make a claim on the escheated property and fill out paperwork to prove your identity. After that, the state should return your property. But some states may have already sold the escheated property and therefor have to write you a check for the proceeds – even if the proceeds end up being less than current market value for the escheated property.

How to Avoid Escheat

There are a few things you can do to help avoid the hassles of escheatment. Always make sure your address is up to date with all financial institutions that you use, and be sure to open mail from these institutions. Also, don’t hang on to checks for years at a time – cash them! Finally, keep a list of all your accounts and account numbers so that you don’t lose track of any over time.

Think Your Property has been Escheated?

If you do think you could potentially have lost track of one of your accounts, there are a few places you can look to see if the state is holding your assets. Shareholders can visit the National Association of Unclaimed Property Administrators website, or MissingMoney.com to search for lost assets. If you do discover lost assets, you will have to contact the state to claim them.

As dedicated financial advisors at Walsh & Associates, we are always reaching out to our clients to make sure accounts don’t slip through the cracks. Make sure your financial advisor is doing the same – or feel free to contact us if you have any concerns.