The process by which state governments assume ownership of dormant accounts is called escheatment, and it can end up costing you money and time. Though the escheatment process was created to handle situations in which an account owner dies without heirs or beneficiaries, it can cause considerable problems for the living as well, especially those who employ a buy-and-hold investing strategy or use dividend reinvestment plans. Luckily, there are four easy ways to ensure your investments do not end up in your state's bank account.

Make Contact

The easiest way to avoid escheatment of your stock account is simply to make contact with your brokerage on a regular basis. This can mean making trades, depositing or withdrawing funds, or simply logging into an online account. If you call or email a representative, retain a record of the response in case your account is deemed inactive down the road.

Depending on the laws of your state, any form of contact with an employee of your brokerage, in a professional capacity, can count toward retaining active status of your account. However, review your state's specific laws, which can often be found on the website of your state treasurer.

Cash Dividend Checks

Another simple way to ensure your account remains active is to cash any dividend checks you receive immediately. Typically, checks are only good for six months from the date of issue anyway, so it behooves you to cash them promptly. However, if your broker issues you a check that remains uncashed and is unable to contact you, your account may be declared inactive.

This method is not applicable to those who utilize a dividend reinvestment plan (DRIP). These plans allow any dividends paid to be used automatically to purchase additional shares of stock, thereby increasing the shareholder's investment effortlessly. This method also does not apply to shareholders who elect to have dividends deposited directly into a checking or savings account.

While the convenience of these options is appealing, it does lead to shareholders putting their investments on autopilot, which can easily translate into a declaration of inactivity. If you utilize a DRIP or automatic deposit arrangement on one or more of your investment accounts, employ one of the other tips listed to avoid escheatment of your assets.

Fill Out Proxy Votes

Each year, you should receive a packet of information from any company of which you are a common shareholder. This packet includes information on issues in which you, as a shareholder, are entitled to have a vote. Because most individual investors are not willing to travel to myriad shareholder meetings each year, the informational packet also includes an absentee ballot, or proxy.

While it might be tempting to disregard this voluntary paperwork, especially if you own only a handful of shares, filling out your proxy votes can be another way to keep your stock account active while simultaneously influencing corporate policy.

Update Your Information

One of the chief reasons stock accounts are declared dormant is the holding entity is unable to contact the account owner. When you move, change phone numbers or get a new email address, update your information with all your financial institutions. In some states, repeated receipt of mail that has been returned as undeliverable can be cause for escheatment, so ensuring your contact information is up to date is crucial.

Financial institutions are required by law to alert you in the event your account is in danger of becoming dormant. If they have the wrong address on file, however, you may never receive the notice. Make sure your broker knows where to find you to ensure your account remains active and you receive all documentation.

Though it is possible to recover escheated property, or its cash value, the simplest course of action is to avoid the mess altogether. Employ one or more of these tips to keep your stock accounts active and your financial future secure. In addition, update your will regularly and make sure your family, heirs or beneficiaries know where you hold accounts to ensure your assets are not forfeited in the event of your untimely death.

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