Approximately one in ten people has some sort of unclaimed property or money floating around somewhere, which is then held by state governments and treasuries across the country. This can happen with property as well. Unclaimed (or abandoned) property is when property or accounts within a financial institution or company where there has not been any activity generated or contact with the owner of the property regarding the property for one year or longer.
Property becomes unclaimed after a designated period of time depending on the state regulations, which is referred to as a dormancy period. During this time, if there is no activity or contact about the property then the property will become unclaimed and needs to turned over to the state.
Types of unclaimed property can be intangible, such as uncashed paychecks and stocks, or tangible, like the contents of a safety deposit box. Some of the most common types of unclaimed property are the following:
- Checking and savings accounts
- Uncashed dividends and payroll checks
- Traveler’s checks
- Trust distributions
- Unredeemed money orders and gift certificates (depends on the state for this one)
- Certificates of deposit
- Customer overpayments
- Utility security deposits
- Mineral royalty payments
- Contents of a safety deposit box
- Insurance payments
- Refunds and life insurance policies
There are many reasons why property could become unclaimed. Sometimes an owner will just forget about a property, but more often it happens when an owner of property passes away or leaves it behind. It can happen when an employee is terminated from a job, an owner changes their addresses without telling anyone, or an owner moves from a location where there was a deposit required.
This can also happen with businesses where they may know that unclaimed property exists but they aren’t sure if the item is worth dealing with (perhaps they think it’s too minuscule and not worth the effort). When a business has unclaimed items, identify any unclaimed property through research. Then you’ll notify (meaning you’ll return it) the unclaimed property to the previous owner, doing your due diligence. If the owner cannot be found, you have to remit the unclaimed property item to the state through an escheatment.
There are also various rules you need to know about property laws and tax procedures.
- A company can be subject to unclaimed property rules in a state without having any presence in that state.
- The statute of limitations for unclaimed property does not toll. Audits can look over the last ten to twenty years, with some states looking back even more than that.
- Audits can go back between ten and thirty years. Most businesses, however, don’t keep records for that long so an auditor will need to use stats to look into the older years. The property owner has to prove if these estimates are wrong, and with no records for earlier years like the 1980s, it will be very difficult and time consuming for the business to find proof.