Consider this scenario: After receiving a job offer in another city, you hustle to pack your belongings and get relocated so you can take advantage of the exciting new opportunity.
But in the rush, you forget to collect a deposit owed to you by the gas company, and don’t provide the gas provider a forwarding address. Moving is stressful and complicated, after all, and it’s easy to overlook small details like a utility deposit.
So what happens to that deposit payment? After a specified period of time (which varies by state), the gas company will report that payment to the state as “unclaimed property.”
A vast range of assets find their way on to state unclaimed property rolls-cash, bank accounts, paychecks, insurance payouts, investment portfolios, jewelry and watches, the list is virtually endless. Periodically, states will hold auctions of unclaimed property to clear the decks, particularly of physical items that require storage, causing consequences for the rightful owners of such assets. Specifically, states often liquidate securities quickly and only provide a rightful owner the liquidation value of the securities and not the current market value, which is frequently substantial.
But it’s critical to recognize that unclaimed property programs have raised issues for consumers, investors and financial professionals. Particularly as Americans have grown more mobile, moving between cities and states regularly and changing jobs, it’s possible you may have overlooked investments or other assets in your name. Here are a few issues you should be aware of surrounding state unclaimed property laws.
Understanding Unclaimed Property Programs
When it comes to unclaimed property, the numbers are staggering: according to the National Association of Unclaimed Property Administrators (NAUPA), the various state unclaimed property programs hold an estimated $41.7 billion in assets waiting to be returned to their rightful owners.
All 50 states and the District of Columbia have unclaimed property laws, which were enacted as a form of consumer protection. If you have money owed to you or other unclaimed property, these laws prevent that property from reverting to the company that holds it. In most cases, states make every reasonable effort to reconnect owners with their unclaimed property-after all, it’s property that belongs to the people, not the state.
That process of connecting people to their property has gotten easier thanks to the ease of publishing and updating databases online. Searching for and finding unclaimed property is easier than ever before with state unclaimed property administrators hosting public-facing websites. (NAUPA’s website includes links to all 50 states’ unclaimed property programs-search for your state’s site here).
So what do consumers and investors need to know about unclaimed property laws? Here are a few things to keep in mind, particularly if you have investment accounts or own other financial products.
First, be aware of your state’s standards for determining “dormancy” on unclaimed property. The trigger for a dormancy period varies by state and by type of asset, so check your state’s relevant laws.
And remember-unclaimed property laws apply to intangible assets like bank accounts, investment portfolios and other financial products. If you work with a financial professional to manage your portfolio, talk to him or her about how state unclaimed property laws could affect you.
For example, if you have an investment account that remains dormant for a specified period of years (in many places, three to five years), and the holder responsible for the account has been unable to contact you, a “presumption of abandonment” could be established.
That presumption means the property would be turned over to the state’s jurisdiction. Once that happens, you may have to file a claim through the state and provide proof of your identity to reclaim what is yours. Some states may even liquidate the account, meaning that even if you are compensated after you file a claim, you may lose important investment value, dividends or tax benefits.
Consider, for example, if you bought a 100 shares of a particular stock on your 33rd birthday that you intend to use for your retirement starting at age 67. Since you have a number of years before turning 67, you just place the information into a file and do not think about it. You then accept a new job, move to a new city and forget to transfer the account holding this asset to your new address, which leads you to not responding to inquiries from your financial professional. After a number of years of inactivity, the state generally liquidates the stock in your retirement portfolio and only provides the liquidation value of the stock when you claim it as yours, not the current market value. The difference between the liquidated value and the current market value is often substantial and negatively impacts an individual’s retirement savings.
In recent years, industry watchers have noted a troubling trend as some states have shortened statutory dormancy periods, resulting in more property being turned over to the states. The Securities Industry and Financial Markets Association (SIFMA), which represents the financial industry and works to protect investors, has recommended dormancy periods of at least five years to ensure the highest level of protection from property being surrendered to the state prematurely.
SIFMA continues to work with other industry leaders to advocate for updating and revising unclaimed property statutes to reflect changing business practices and to protect investors and consumers.
Beware of Fraud
Second, be aware of the possibility for fraud through which another person could lay claim to property that’s rightfully yours. The commendable transparency of unclaimed property programs, combined with a lack of public awareness about how the laws work, can be exploited by resourceful criminals who file false claims.
In one recent case in Florida, a man and a woman attempted to claim more than $730,000 in unclaimed property by reactivating dormant corporations. Once they established a phony trail of “ownership,” they filed claims on the publicly listed unclaimed property.
In that case, the fraud was detected by the state’s fiscal officer, and those two individuals now face an array of felony charges. But others are no doubt seeking to exploit unclaimed property laws to their advantage.
That case is a reminder that while states should not erect barriers that make it more difficult for owners to reclaim their property, they do want to take care to ensure that property is returned to its rightful owners.
Make Sure You Don’t Have Unclaimed Property-And Keep Good Records
Finally, it’s a good idea to familiarize yourself with your state’s unclaimed property laws to be sure you know how they work.
Find your state’s unclaimed property website and run a check on yourself to ensure you do not have unclaimed property with the state. Be sure to check other states where you have lived previously.
Most searches will probably yield no results, but in the event that there is money or other unclaimed property belonging to you, you want to know about it.
You should also keep up to date records of your assets so they don’t fall into the unclaimed property pile through neglect or inattention.
Some additional helpful guidance includes:
- Cash all checks for dividends, wages, and insurance settlements without delay.
- Respond to requests for confirmation of account balances and stockholder proxies.
- If you have a safe deposit box, record its number, bank name and address, and give the extra key to a trusted person.
- Finally, prepare and file a will detailing the disposition of your assets.
Following those steps will go a long way toward ensuring that your property remains in your hands-where it belongs.