Have you checked your state’s unclaimed funds website recently? You never know which of your assets may have slipped through the cracks and been “escheated” to the state.
What is escheatment?
If an account is dormant (has no activity) for a specified period or abandoned (if the rightful owner cannot be located), the account’s funds are escheated. The rules for abandoned property vary from state to state. In New York State, the dormancy period for bank accounts is three years, whereas bank accounts in Florida are escheated after five years.
Inactivity or abandonment might be determined if:
- there is no owner-generated activity, such as deposits or withdrawals
- physical mail is returned to the sending institution as undeliverable (bank statements, etc.)
- there are no responses to bank notices
- safe deposit box fees are not paid
- estates take a long time to settle or to identify the deceased person’s assets
Commonly Escheated Assets
Examples of escheated assets are numerous, but the most common are:
- homeowner’s and/or medical insurance claim reimbursements
- annuity payments
- checking, savings, and CD account funds
- safe deposit box contents
- stocks, bonds, mutual funds, and other types of securities
- PayPal and Venmo account funds
- uncashed checks from tax refunds, wages/salaries, and investment dividends
- gift cards
Do you have unclaimed funds?
- You can research. Visit the National Association of Unclaimed Property Administrators (NAUPA) website and check the names of potential claimants in all 50 states. Be mindful that you need to know the claimant’s address(es) in each state and potential name variations.
- If you are contacted by companies that offer to recover funds for a fee, look on the NAUPA website and make the claim yourself.
Who can claim property?
- Original owner
- Heirs of the original owner
- Executor or personal representative of an estate that is being probated
- Beneficiary or co-owner listed on the account
How to Claim Property
If you find an entry on the NAUPA website for you or someone you know, here’s how to claim the property:
- Some claims can be quickly submitted online with minimal identifying information
- Some claims involve a mail-in form, often requiring a notarized signature and proof of the address associated with the escheated asset
- Tip: keep copies of bills from addresses where you lived
- You’ll need the social security number for the owner of the assets and/or beneficiaries
Claiming Property of a Deceased Owner
You’ll have to prove that the person is deceased and identify their executor and heirs. These are the documents you may need:
- Death certificate
- Current Letters Testamentary (if the Letters are old, go to Surrogate Court and get a recent copy of the Letters Testamentary)
- Table of Heirs (a record of the decedent’s spouse, children, and other potential relatives, with addresses and Social Security number)
- Proof of addresses associated with the assets (a challenge if the deceased moved often or had their mail delivered to a location other than their residence)
Potential Tax Consequences of Asset Recovery
When claiming assets that have changed in value over time, such as investment securities, there may be an unexpected tax liability on capital gains. States generally liquidate holdings from brokerage accounts or stock transfer agents rather than transferring them in kind back to the original account or owner. This sale of securities generates capital gains or losses (i.e., the difference in the value of the purchase price vs. sale price). The claimant has no control over the timing of security sales and cannot attempt to time market conditions and/or manage taxable income in any given year.
In a case we recently handled, multiple factors that could trigger escheatment were in play. A woman hired Eddy & Schein Group to help sort out her finances and to get her mother’s estate settled. She mentioned a pile of uncashed checks – our clue to check for unclaimed funds.
The client’s deceased mother owned several stocks outside of a brokerage account. Prior to her death, the mother moved a couple of times and didn’t inform all the companies. In the eight years since she died, the stocks had generated numerous dividends, which were paid by check. There had been stock spinoffs as well. At a certain point, all the stock holdings, dividends, as well as medical insurance reimbursements, and bank accounts, were escheated.
Eddy & Schein Group helped our client recover a sizable amount of money from New York State by pursuing unclaimed funds. A portion of the recovery was taxed because of the liquidation of the stock holdings.
How to Avoid Escheatment and Asset Recovery Issues
Follow these steps to minimize the risk of asset escheatment, especially if you are stepping in to manage your parents’ finances:
- Identify assets. A good guide to learning about your parents’ assets is prior years’ tax returns. These will show payors of funds that may indicate current bank or brokerage accounts, even if you have not received monthly statements. Your parents may have elected to go paperless, leaving you with no clue about accounts.
- Consolidate assets. This simplifies paperwork and reduces the chance of losing track of some assets.
- Demonstrate account activity. Periodically log in to online bank and investment accounts.
- Cash checks. Deposit or cash even the smallest of checks you receive.
- Replace stale checks. If you come across uncashed checks and they have passed their deposit by date, ask the issuing institution to reissue the checks. We often come across stale medical insurance reimbursement and dividend checks when working with new clients.
- Report address changes. Ensure that important mail follows you to new addresses.
- Consider joint account titling. Having joint title with someone in a different household may make it easier for the issuing institution to track down one of the parties.
- Vote your proxy. Vote and return proxy ballots for stock shareholdings.
- Respond to notices. If you get a notice of impending escheatment from an institution, be sure to respond.
- Designate a representative to manage your account. This could be a power of attorney assignment specific to one institution or making sure your power of attorney is acknowledged by all your financial institutions.
- Get informed. Learn about the escheatment laws of your state.
According to the NAUPA, one in 10 Americans has unclaimed assets. Because of the large scope of this issue, unclaimed property collections are a notable source of states’ revenue. There is speculation that states may enact laws to hold onto unclaimed property by cutting the time in which claims can be filed and/or by increasing enforcement of unclaimed property laws.
When clients hire Eddy & Schein Group, we quickly check unclaimed funds websites and sometimes find assets to be claimed. If you get a notice of imminent escheatment, this may reveal larger financial management issues. We can help… please call us.