Initially when people hear the words “seized funds” they immediately panic. However, Escheatment laws are in fact the process of states seizing unclaimed financial accounts. In fact, the escheatment laws are in place to protect financial assets for their rightful owners. Individual states have laws in place and they are varied though in general, the laws take effect after an account has been inactive for five years.
What accounts are impacted
Escheatment laws cover all types of financial accounts including checking, savings, IRA and insurance policies. These laws also include contents of safe deposit boxes. Escheatment laws do not cover real estate in any manner, the only physical property they include are those that are found in safe deposit boxes.
What happens to these accounts
Financial institutions including banks, brokerage firms and insurance companies are required to attempt contact with the account holder at least annually. If they are unable to locate the owner, these funds are then transferred to the state. The “state” in this case means the state where the account holder resided, not necessarily where the assets are held. The state then maintains a database of these assets and holds them for the benefit of the rightful owner.
What happens to assets
Assets such as stocks and bonds are generally liquidated and held as cash. In some cases, other assets found in safe deposit boxes such as collectible stamps, jewelery, etc. are also sold and the funds from the sale are held as cash. The time to liquidate these assets does vary from state to state so it is important to check the laws in the state the original account holder lived.
Who can claim the assets under escheatment laws?
The rightful owners, heirs or administrators of estates are eligible to claim assets that are held by various states under the escheatment laws. Each state has the right to dictate the method of filing a claim. Under no circumstances should anyone pay a third party to claim assets on their behalf; states may charge a very minimal application fee but there are not any other fees associated with filing a claim.
Where do I find out if I have unclaimed assets?
States maintain a list of all assets that have been transferred under the escheatment laws. State websites generally have a section of their website (under consumers) that will allow users to search for assets. Those who are uncertain about where to find them may use the NAUPA (National Association of Unclaimed Property Administrators) website to identify how to find unclaimed assets in their state.
Escheatment laws are meant to avoid having unclaimed assets held at financial institutions for long periods of time. Each state determines how the laws will be handled but in most cases, the institution must hold assets for at least five years. Account holders and heirs of deceased financial account holders should review their states unclaimed property laws and search their databases for potentially unclaimed assets.