When helping clients organize their finances, we typically start by sorting and reviewing their papers. Sometimes, we find uncashed checks.
Determining if a check is valid depends on the type of check issuer, the issue date, the payee, and whether the payee still has an open bank account. Legally, banks are required to honor personal, business, and payroll checks for six months. After six months, they’re considered “stale.”
Checks issued by the U.S. Treasury, such as tax refunds, are good for one year after the issue date. Checks from state or local government agencies expire according to state law.
When we find uncashed checks, we look at issue dates to see if they can be cashed. Then, we look through the client’s accounts online or paper statements to confirm the checks were not previously deposited via a mobile banking app.
Why are uncashed checks hanging around?
It is easy to overlook important items in a busy life. Whether meticulously organized or chronically disorganized, a person may end up with lost or stale checks if:
- They have been ill or away from home for an extended period and have mounds of unopened mail.
- Checks have come at a time when handling their personal affairs was too challenging.
- They drop their mail on the dining room table, kitchen counter, or desk to be addressed later.
- They don’t have a system for handling their affairs and managing their financial papers.
- They have set checks aside because of questions about the type of account where they can be deposited – trusts vs. personal accounts.
- The payee has died, and an estate account is not yet set up.
- They are an overwhelmed executor who may collect checks issued to the deceased and misplace them or not know what to do with them.
What types of checks might be in the pile?
Some examples of uncashed checks we have found are:
- Medical insurance reimbursements
- Premium refunds from mutual insurance companies
- Gifts from friends or family
- Stock dividends, especially if the stocks are paper certificates or with a transfer agent.
What to do with uncashed checks you find?
For checks issued within the valid time period:
- Deposit or cash them.
- Note any checks that could have tax consequences, like medical reimbursements. These may need to be reported as income in the year they were issued, not the year they were deposited. Confirm this with your accountant.
- If checks are from a family member or friend, contact them before depositing to ensure they have sufficient funds in their account.
For checks issued before the valid time period:
- Call the issuer and request a replacement check. You may need to complete some forms. Ask when you will receive the replacement check, and be on the lookout for it.
- If the issuer says they cannot re-issue the check because the funds were escheated to the State, check for Unclaimed Funds on the State’s website. This is always a good practice, whether or not you find checks.
What if an expired check is deposited?
- If you have a local banker who knows you, they may contact the issuer to determine if the check would be honored.
- Some banks will accept the deposit but will charge a bounced check fee if the issuer’s bank denies payment.
How can you avoid checks accumulating?
Ask the issuer to convert your payments to direct deposit. You can most likely do this online, or you may need to fill out a paper form.
Consolidate stocks with a brokerage firm and have dividends posted to the brokerage account or paid electronically to the stock owner’s bank account.
See other articles in this series – Part 1: “Stock Documents Buried in Piles of Papers;” Part 2: “Cash Stashed Under the Mattress,“ and Part 4: “Uncovering the Coverage.”
For information on our services in this area, please visit our LifeKeeping page.