Escheat

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  • Post last modified:December 15, 2023
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Escheat is a legal process through which unclaimed or abandoned property reverts to the state or government. The term “escheat” is derived from the Old French word “eschete,” meaning “that which falls to one.” Escheat laws vary by jurisdiction, but the general principle is that if a person dies without a will (intestate) and has no known heirs, or if certain types of property remain unclaimed for an extended period, the property may revert to the state.

Key points related to escheat include:

1. **Unclaimed Property:**
– Escheat commonly applies to unclaimed financial assets, such as bank accounts, uncashed checks, security deposits, insurance proceeds, and other tangible or intangible property for which there is no apparent owner.

2. **Intestacy:**
– Escheat may occur when an individual dies without a will and there are no known heirs or beneficiaries to inherit the assets. In this case, the state may step in to claim the assets.

3. **Dormant Bank Accounts:**
– Bank accounts that have been inactive for an extended period, and the account holder cannot be located, may be subject to escheat laws. The funds in these dormant accounts may be turned over to the state’s unclaimed property division.

4. **Time Periods:**
– The time period after which property is considered unclaimed and subject to escheat varies by jurisdiction. It is typically several years of inactivity or lack of contact with the owner.

5. **Notification Requirements:**
– Some jurisdictions have specific requirements for companies and institutions to notify owners of dormant accounts or unclaimed property before escheat proceedings can begin.

6. **Recovery by Owners:**
– In many cases, even if property has escheated to the state, owners or their heirs may have the right to reclaim the property by providing evidence of ownership. This process is often facilitated through the state’s unclaimed property program.

7. **Purpose of Escheat Laws:**
– Escheat laws serve various purposes, including providing a mechanism for the orderly transfer of property when there are no apparent heirs, preventing assets from being abandoned indefinitely, and allowing the state to use unclaimed funds for public purposes.

8. **Administration by States:**
– States typically have an unclaimed property division or department responsible for administering escheat laws. These divisions maintain databases of unclaimed property and work to reunite owners with their assets.

9. **Recordkeeping Requirements:**
– Companies and financial institutions are often required to maintain records and report unclaimed property to the state, along with efforts to locate the owners.

Escheat laws are designed to balance the interests of individuals with those of the state in cases where property is left unclaimed. States have different rules and procedures regarding escheat, and individuals are encouraged to be aware of their rights and obligations related to unclaimed property. It’s important for individuals to keep their contact information updated with financial institutions and other entities to avoid the risk of their property being subject to escheat.