While hardworking Americans do their best to ensure family and loved ones inherit their property and savings, unattended or abandoned assets risk being turned over to the state. This process is called "escheatment," and it was established centuries ago to prevent unclaimed properties from sitting in limbo without a recognized owner.
According to the U.S. Securities and Exchange Commission, financial institutions in every state must file a report when personal property goes unclaimed or abandoned for a certain period of time. State laws establish these time periods.
Brokerage firms must abide by these laws, and for an account to be considered unclaimed or abandoned, a reasonable effort must be made to contact the owner of the account. If this proves unsuccessful and the account remains inactive for the specified time period, the state requires the firm to report the account. Through "escheatment," the state claims ownership of the account.
The state treats these accounts as bookkeeping entries. Former account owners can make claims against these entries. Generally, the state will sell securities in these accounts and treat proceeds as state-held funds. If the account owner files a legitimate claim, the state may provide a cash payout equivalent to the account's value before escheatment. This payout will not include interest or dividends from the time following escheatment.
The Escheatment Process at Work: A Recent Example
A recent article posted in the Madison Record reports the story of a maiden millionaire who passed away with no heirs. As a result, her $1.3 million estate was turned over to the state. Shortly after, the courts received more than two dozen ownership claims.
Such a scenario is a nightmare for anyone with relatives who own substantial property; however, million-dollar estates are not the only ones at risk. Bank accounts, retirement funds, money orders, and stocks are all susceptible to being reclaimed by the state after a certain period of time.
The best way to avoid escheatment is to contact a lawyer who provides estate planning services. Even if you do not have heirs, you can appropriate your funds and assets to charitable organizations or other causes.
If you require the services of a Wheaton estate planning attorney, Stock, Carlson, Flynn & McGrath, LLC can help. With a compassionate approach backed by 30 years of legal practice, our attorneys provide each client with the attention and guidance they need to develop comprehensive estate plans. To schedule an appointment, please call us at 630-665-2500.