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Every state has unclaimed property laws (also referred to as "Escheat" laws) which declare money, property, and other assets to be abandoned after a period of inactivity of three to five years. During this abandonment period landlords, banks, utilities, hospitals, brokerage firms, mutual funds, insurance companies, and other organizations are required to try to return the valuables to their rightful owners. If they are unsuccessful, they then turn the property over to the state's abandoned-property division or unclaimed property office.
•The property is intangible personal property. (e.g., uncashed checks, outstanding customer credit balances, unclaimed stock certificates, mineral proceeds, customer deposits)
•Owner-generated activity ceases to occur with respect to the property.
oNotice that the requirement is NOT that the owner’s whereabouts are unknown. You might know where the owner is, but the owner refuses to generate any activity.
•The property remains unclaimed by the owner for a period of time prescribed in the statutes as the "dormancy" or "abandonment period."
•There is a "fixed and certain obligation" owed by the holder to the owner. The amount is a known amount.
The state with the first right to “hold” the funds on behalf of the owner/vendor is the state of the owner's/vendor’s last known address (as shown on the company’s records). The address would have been sufficient for the delivery of mail.
If there is no last known address of the owner/vendor, then the funds follow the state rules for the state of incorporation or state domiciled if not incorporated.
If there are 100 owners that are in suspense, with the last known address in 20 different states, then 20 different sets of rules will be applied on an owner-by-owner basis. The state the funds are paid to holds the property in a custodial capacity until claimed by the owner.
The underlying concepts for complying with all states’ general escheatment laws are simple; it is just that each state can be different, and that is part of the problem. Each state has set a “dormancy period” — the amount of time that can pass before the property becomes escheatable. For most states, this is three or five years for mineral proceeds and one to three years for Uncashed Checks. But certain types of property may become escheatable much sooner or later. Before the funds are paid to the state, most states require one last attempt, as part of due diligence, to give the owner/vendor a chance to claim their funds before they are turned over to the state. This is generally done with a letter sent to the last known address of the owner/vendor. Some states don’t require such an effort, while others only require the effort when the dollar amount exceeds a certain amount. The letter, in most cases, must be sent out anywhere from 60 to 120 days before funds are forwarded to the state. Again, some states have longer time frames, some less.
There are multiple reporting deadlines amongst the states and US Territories. November 1 of every year is the reporting date for many states; March 1 is the second most common due date, but other states have reporting deadlines in April, May, or June. Certain types of firms and items can have different dates in some states, but for majority, November 1 and March 1 are the critical dates. On one or the other of those dates (according to the state), all unclaimed property that has become escheatable must be reported — remember, funds must be reported to the state of the last known address of the owner/vendor, unless Rule 2 of the 1965 ruling applies. Then, funds must be reported to the state of incorporation or state of domicile when not incorporated.
Please note: as states start looking for funds to balance their budgets, it isn’t unusual for one or two of them in any given year to change the dormancy period or reporting date.
Each state has its own reporting forms and systems, but fortunately, the majority have adopted the National Association of Unclaimed Property Administrators (NAUPA) system for electronic reporting. The system creates this electronic file as part of the Unclaimed process. Each state will have its own cover page/summary reporting form to fill out. Some require the form to be filled out online. See each state’s unclaimed property web page for a copy of their cover page/summary reporting form and/or any special reporting requirements.
Some states require a “negative report” — one that states no unclaimed property is outstanding. Some negative reporting only kicks in once a return has been filed in that particular state, some only apply to states that are incorporated in that state. See each state’s unclaimed property web page for a copy of their reporting form.
Web References:
National Association of Unclaimed Property Administrators (NAUPA) http://www.naupa.org/ or http://www.unclaimed.org/
Unclaimed Property Professionals Organization (UPPO) http://www.uppo.org