Escheatment

Introduction

A method of transferring ownership of unclaimed assets or property to the state when the true owner cannot be found is referred to as escheatment. This approach is taken to avoid misplacing or abandoning the item and ensure it is put to good use.

Escheatment can occur in various circumstances, including when a person dies without leaving a will or any heirs or when a company goes bankrupt, and its assets cannot be distributed to its shareholders.

Define Escheatment

Escheatment is a legal term that is used worldwide. When the actual owner of the property is not found, the state confiscates the property so that it be put to good use. This method has been introduced to benefit the economy and helps the people's growth.

Understanding Escheatment

The concept of escheatment dates back to feudal times when landowners would reclaim property not used by its tenants. Today, the term escheatment is more commonly used to refer to transferring ownership of unclaimed assets to the state.

In the United States, many rules are governed individually by separate states. This causes a variation in the laws governing escheatment. The process usually begins when a company or financial institution cannot locate the owner of an account/asset for a specified period which is usually between three to five years.

Process of Escheatment

Once the period of unclaimed property has passed, the company or financial institution must turn over the assets to the state. The state will then hold the property for a certain period, usually one to five years until the rightful owner can claim it. The rightful owners must claim the property during this time, or the state will auction it. The money gained will be used for the benefit of the public, such as education or healthcare.

Escheatment for Unclaimed Assets

Escheatment can occur with any unclaimed asset, including bank accounts, securities, insurance policies, and safe deposit boxes. Sometimes, companies must notify that account holder before confiscation (it varies from state to state).

Escheatment and Death

Escheatment can also occur when a person dies without leaving a will or any heirs to claim their assets. This makes the state the legal owner of the property. These properties are sold at auctions, and the money acquired is used for healthcare and education. To avoid escheatment after death, individuals must have a will that clearly outlines their wishes for their assets. Additionally, individuals should ensure that their heirs know their assets and how to claim them.

How to Claim Escheatment

If you believe your property has been escheated to the state, you can typically claim it by contacting the state's unclaimed property department.

A copy of proof of ownership is required, such as a bank statement or insurance policy. The process for claiming escheated property varies by state, but it generally involves completing a claim form and providing documentation to prove ownership.

What If the Account Gets Escheated?

If an account is escheated, the state owns the property. If this happens, the account holder will have about one to five years to reclaim it. The state will auction the property if the account holder cannot reclaim it during this period. The money generated is used for the benefit of the public.

Examples of Escheatment

There are many examples of escheatment, including −

• Unclaimed Bank Accounts − The bank can legally escheat the account if it is inactive for three to five years. The state will then try to locate the rightful owner and return the funds to them.

• Unclaimed Life Insurance Policies − If the beneficiary of a life insurance policy cannot be located after the insured has passed away, the policy may be escheated to the state. The state will then try to locate the beneficiary and return the funds to them.

• Unclaimed Safe Deposit Boxes − If a safe deposit box owner fails to pay the rental fee and cannot be located, the box's contents may be escheated to the state. The state will then attempt to locate the owner and return the contents to them.

• Unclaimed Stocks and Bonds − If a stock or bond account owner does not claim dividends or interest for a certain period, typically three to five years, the account may be escheated to the state. The state will then try to locate the owner and return the funds to them.

• Unclaimed Property of Deceased Persons − If a person passes away and their heirs or beneficiaries cannot be located, their assets may be escheated to the state. The state will then attempt to locate the heirs or beneficiaries and return the assets to them.

Conclusion

Escheatment is an important legal process that helps ensure that unclaimed property is not lost or abandoned. While the process can be complicated and varies from state to state, funding various public programs serves an important public function.

FAQs

Q1. How long does it take for a property to be escheated?

Ans. The time before the property can be escheated varies by state and depends on the property type. Bank accounts are escheated after three to five years of inactivity, while safe deposit boxes are escheated after one year of non-payment.

Q2. What happens to the escheated property?

Ans. Escheated property is typically sold at a public auction, with the proceeds going towards public programs such as education or healthcare.

Q3. Can I prevent my property from being escheated?

Ans. Yes, it is possible to prevent your property from being escheated. The accounts and policies need to be kept up to date. The heirs must be aware of your assets and how to claim them.