UNCLAIMED PROPERTY LAW

What is Unclaimed Property?

Each year in the United States, billions of assets such as uncashed checks, lost shares of stock, forgotten bank accounts, customer credits, escrow accounts, paychecks and unused store credits go unclaimed.  Companies (holders), are obligated to report these unclaimed funds to the states on an annual basis.

Reporting must take place after a statutorily defined period of inactivity (dormancy) has elapsed.  The state where the property must be reported is generally determined by the last known address of the owner, which can be a person or business, and in the absence of that information, it is reported to the holder’s state of incorporation.  The rules for reporting unclaimed property have been affirmed by several Supreme Court decisions.

The states’ unclaimed property laws are derived from British Common Law, where in the absence of a rightful owner, property would revert to the Crown.  In the United States, the process is custodial in nature, meaning that the states do not take ownership of the property, but hold the property on behalf of the rightful owners in perpetuity.  The states’ laws are designed to protect the rights of the lost owners or their heirs, and in the absence of the rightful owner, ensure that the holders are not unfairly enriched.  In many states, a portion of the unclaimed property may be used for beneficial purposes, such as college scholarships, to help construct libraries or to contribute to the general fund.