Does the state have your money?

  • Financial institutions are required to attempt to contact the owner.
  • 26 states can escheat property after just three years of inactivity.
  • A wrong address may make an account vulnerable to escheat.

Many of us have accounts we haven't checked up on in a while: savings accounts we started for a specific goal that we've since put on hold; dividend reinvestment accounts we started to finance a child's higher education.

We probably assume that these accounts will be there when we need them. Because of a practice called escheat, however, that assumption could end up turning your financial life upside down.

Escheat laws were originally intended to create a sort of giant "lost and found" for each state. Unclaimed property could be taken away from institutions that might try to hide them on their books and hope that no one noticed they were gone.

But to cover budget shortfalls, some states quietly empty this lost and found into their general funds, trampling private property rights in the process, says William Palmer, a California attorney who has represented many victims of improper escheatment.

"Things are just getting escheated, getting liquidated, and these statutes that are supposed to be for preserving assets for owners that have forgotten about them have turned into revenue generators for the state," says Jennifer Borden, an attorney with Holland & Knight based in Boston. "The fact that the owners don't get their money back -- which is supposed to be the goal of the statute -- now seems to be of little consequence to the state."

One woman's experience

Madonna Suever of Oregon found out about the perils of escheat first hand. Her mother, who lived in northern California, had received a cashier's check from World Savings Bank for over $16,000 from the estate of Suever's uncle after he passed away in 1986.

Like many women of her generation, Suever's mother was a financial novice, and kept the check uncashed until her husband's death in December 2001. After Suever learned of the money, she took the check to Wells Fargo to establish a savings account in her mother's name.

A few days later, Wells Fargo returned the check, citing insufficient funds. Suever contacted World Savings Bank, which informed her that the money had been escheated to the state. Suever and her mother were incredulous -- they had never received any kind of notice from the state.

"Nobody tried to get a hold of my mother, and she lived in the same house for the last 45 years and had the same telephone number listed in the telephone book," says Suever. "There was only one Suever in the whole area, and she filed taxes every year."

After being bounced back and forth between different government agencies for months, Suever grew increasingly frustrated. The lost money was becoming a source of conflict between her and her mother, who was suffering from the onset of Alzheimer's. So Suever turned to Palmer, who was working with other owners to get their escheated property back.

Suever joined a class-action suit brought by Palmer's clients against the state of California and eventually got her mother's money back. She's currently involved in litigation to force the state to pay interest on the money they held.

Suever isn't the only client of Palmer's to lose money to escheatment. Chris Taylor, a former Intel employee, had millions of dollars worth of stock in an employee stock plan held in California. Despite the fact that Taylor was in regular contact with other departments of the company, the division keeping track of his stock reported it as unclaimed property to state auditors, says Palmer. The auditors took a chunk of his stock and sold it; Taylor didn't find out until he was making final plans to retire that a portion of his retirement money was gone.

"You think that you have your retirement savings safe and sound," says Borden. "Then find that they're in the hands of the state and they've been liquidated well below what they should have been."

Escheat happens

So how does an investment account or other property get confiscated as unclaimed property?

Accounts become "abandoned" in a number of ways. You can fail to cash a check, forget to update the address on the account, fail to respond to a proxy statement or simply fail to make contact with your financial institution for a "defined period of time," says Borden. That can range anywhere between just three and seven years, but, she says, "the definitions can get a little sketchy."


Once an asset reaches the "abandoned" threshold, the institution may try to contact you via mail or phone before reporting your property as unclaimed. But if the owner's address is wrong or he or she simply doesn't open the letter, the escheat process begins.

States find out about abandoned accounts in one of two ways: your financial institutions could include it in a required yearly filing or it could be discovered in an audit, says Nebraska Treasurer Shane Osborn, president of the National Association of Unclaimed Property Administrators.

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