What Is Abandoned Property?
Abandoned property is a piece of property, a dormant account, or an unused asset that has been turned over to the state after several years of negligence or inactivity. States have abandoned property divisions that focus on the management and recovery of unclaimed property, known as escheatment. In general, assets will take this route after a dormancy period of two to five years.
- Abandoned property refers to neglected or inactive accounts or assets that have been turned over to the government for custodianship.
- Each state has escheatment laws that determine when an asset is legally considered abandoned and how to recover such assets.
- You can check with your state or through free online services to see if you can claim any abandoned property that is in your name.
Understanding Abandoned Property
Once property is registered as unclaimed, a certain amount of time must pass, known as the dormancy period, before it can be deemed abandoned and turned over to the state. In the U.S., state laws determine when an asset is legally considered abandoned. Deadlines vary from state to state, though at least two years must typically pass before property acquires this status.
States have abandoned property units that focus on the collection, management, and dissemination of abandoned property. These divisions allow abandoned property to be channeled to a state organization rather than the company where it is held or was issued.
Some states hold property and allow the original owners and heirs to claim it indefinitely. In other territories, if the property goes unclaimed for too long it may become the state's property through a process known as escheatment. In many cases, the assets that are abandoned will be auctioned or converted to cash for more convenient safekeeping. Assets maintained by each state can be used to support its activities. These assets generally include only a small percentage of the state's revenue at less than 1%.
Types of Abandoned Property
Abandoned property takes on a variety of forms and can be both tangible or intangible. Unclaimed assets may include real estate, land, and safe deposit boxes as well as life insurance policies, unpaid wages, and securities held in financial accounts such as stocks, bonds, and mutual funds.
In Massachusetts, a bank account that has seen no activity for more than three years will be turned over to the state.
Benefits of Abandoned Property
The idea that the state you live in can take possession of your bank account if you don't access it for a certain period of time might not sound very fair. However, in reality, abandoned property laws were actually put in place to protect consumers.
In many cases, turning unclaimed funds over to the state makes it easier for people to claim back what is rightfully theirs. Previously, property would remain with the financial institution (FI) or other entity in possession of it. That meant there was no centralized channel to recover unclaimed assets and that these resources remained in the hands of parties with perhaps little incentive to locate their missing owners.
It has also generally been accepted that any assets that remain unclaimed for a lengthy period of time should be used for the public good. In other words, if it comes down to escheatment, it is better that the returns from abandoned property go into public coffers rather than enrich individuals in the private sector.
FIs with dormant accounts are required by law to make efforts—such as sending reminders and issuing notices—to locate the owners of these assets before transferring title to the state.
Retrieving Abandoned Property
The National Association of Unclaimed Property Administrators (NAUPA) was formed to help support consumers in retrieving unclaimed property assets. In partnership with state organizations, NAUPA has built a database that allows consumers to check government records for unclaimed property in any U.S. state where they have lived. Individuals can search for unclaimed property through state-sponsored websites as well.
Owners of unclaimed property can easily reclaim their assets by filing a claim with the appropriate state. States have processes in place for actively locating owners of unclaimed property. They may search government records to identify and locate individuals, often contacting them through various means.
Typically, only half of a state's unclaimed property is reclaimed each year, providing some additional revenue for U.S. states through the assets of unclaimed property. Some states maintain online registries of unclaimed assets and dormant accounts. This enables rightful owners to reclaim assets even after escheat rights have been granted to the state. However, these efforts are ultimately subject to state law, and states can institute a statute of limitations that restricts claims after a specified period of time. Statutes of limitation usually help to protect states that sell assets or spend funds for their own use, making these assets less recoverable over time.