Escheatment Laws and Regulations

Business.com / Finances / Last Modified: February 22, 2017

Escheatment is the process through which the state takes ownership of property that is, or is believed to be, abandoned or unclaimed. ...

Escheatment is the process through which the state takes ownership of property that is, or is believed to be, abandoned or unclaimed. Escheatable property can be both tangible and intangible. However, businesses tend to experience the most conflict with intangible property that the state deems abandoned or unclaimed. Intangible property includes unredeemed gift cards, uncashed vendor, payroll checks and misapplied cash receipts. Property left in storage facilities, vacated apartments and such falls into the tangible category.Escheatment laws and regulations are both general and state-specific. Because property rights are regulated by each state individually, it’s the state that defines what, where and when abandoned or unclaimed property is turned over to the state. But there are also certain general guidelines to follow, regardless of the state in which your business is located. To know that you are following proper escheatment laws and regulations, you should:

1. Know the standard laws of escheatment related money - abandoned or unclaimed bank and investment accounts.

2. Familiarize yourself with your state’s laws for abandoned property in vacated apartments, storage units and business spaces.

3. Understand time frames involved in the escheatment laws and regulations for your state.

Learn about the standard laws of escheatment related to abandoned or unclaimed bank and investment a

Owners of bank accounts, investments, cash, securities and other investments stand to lose the rights to those accounts or financial property if the property goes unclaimed for a given period of time - usually 5 to 7 years. Owners of banks, brokerage firms and other businesses dealing with financial matters should be aware of the escheatment laws in their states so they'll understand about their rights to property abandoned by account holders, or accounts they own and might be in danger of abandoning.
The U.S. Securities and Exchange Commission addresses basic escheatment laws pertaining to financial accounts that have been abandoned or have gone unclaimed. Regardless of state law, overall regulations require the brokerage firm or bank to make a diligent effort to track down the owner of the account before initiating escheatment proceedings. One method banks and businesses can use to track down owners of unclaimed money, investment accounts, and other funds is to use a service like the one provided by the National Association of Unclaimed Property (NAUPA), which hosts a website where individuals can look-up property held in their names.  This organization is affiliated with state treasurers’ offices and provides resources to both financial institutions and individuals to ensure compliance with escheatment laws.

Understand your state's laws for abandoned property in vacated apartments, storage units and busines

While a tenant is required to move out all property from an apartment, business or storage unit they are vacating, property is sometimes left behind. The landlord or owner of the space being vacated must contact the former tenant to make arrangements to return the property. In the meantime, the landlord may choose to charge the tenant storage costs. If the tenant doesn't claim the property after the specified time, the landlord must place an ad trying to find the owner of the property. If there is no response to the ad, the landlord turns the property over to the local police department to attempt to locate the tenant/property's owner. If this person can't be found, the landlord may become the owner of the property and can do with it whatever he or she sees fit.
State-specific laws and regulations are available from state agencies such as the California Department of Consumer Affairs website.  For property abandoned in storage facilities, all the state storage laws, including escheatment laws and regulations, are accessible from StorageLaws.com.

Understand the time frame for enacting escheatment proceedings on abandoned property or money

Learning your state's escheatment laws and regulations including the exact time frames for both property abandonment and presumption of death, will help make the process smoother for you should you have to initiate an escheatment procedure. The time frames one must wait before initiating such procedures differs by state and by property type. For property left behind in an apartment, storage facility or other rental space, the property's owner may have as many as two to three weeks to claim the property but can most likely be charged an additional storage fee of the property. Then additional time is usually needed if your local police department is involved before you as the landlord can actually sell or claim the property. In case of monetary funds, the presumption of death can be a much longer process, especially if the person owning the funds or accounts has no heirs.
The US Legal Definitions site provides a list of general legal forms relevant to escheatment laws landlords must follow. Refer to the LawDigest.com for your state’s laws on the disposition of unclaimed property and escheatment procedures to learn the time frames involved.
  • If you offer gift cards for your goods and services, be sure to check your state's escheatment laws and regulations. In many states, gift cards are subject to escheatment laws and regulations after three to five years. To navigate these laws, some gift card issuers charge customers fees to cover dormancy and administrative costs. However, other states now exclude gift cards from escheatment laws and regulations altogether.
  • A certified professional accountant (CPA) can help businesses better understand their escheat liability by performing an escheatment analysis. To do this, the CPA investigates the characteristics of the escheatable property, identifies involved parties and the period of time that the property has been deemed unclaimed or abandoned.

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