Escheatment

Escheatment is a legal process in which the government takes control of assets unclaimed for a long time. The state authority holds abandoned properties or dormant accounts for a limited period. It, thus, allows the owner, beneficiary, or legal heir to reclaim them. Proceeds from the sale of these assets go toward state funds.

Banks and financial institutions maintain records of inactive accounts or unowned estate assets (bona vacantia). And they must report it to the state after a set period. If a person goes missing or dies without naming a beneficiary or heir to their assets, the government inherits them. Escheatment covers both tangible and intangible assets including securities.

• Escheatment meaning describes a legal procedure in which the government seizes real estate assets, securities, and bank accounts that have been left unclaimed for an extended period.
• The court of law orders the escheatment of funds only after ensuring that no owner, beneficiary, or legal heir is present to claim the abandoned property and asset in question.
• Banks and financial institutions must contact the owner of inactive accounts and unowned estate assets for three to five years and eventually transfer the abandoned properties to the state.
• By giving the authorities proof of identity, unique paperwork, and legal ownership rights, one can claim their rights to the escheated property or asset.

The escheatment process refers to the government's entitlement to assets if it goes unclaimed or abandoned for whatever cause. It follows the court order or passage of an extended period. Its origin can be traced back to the Roman Empire and the English feudal system. Then, the king had the authority to take possession of any real estate belonging to a deceased person without regard to any claim, legal beneficiary, or ownership rights. Later, the U.S. government implemented escheatment of funds, encompassing bank accounts, intangible assets, mining royalties, stocks, and utility deposits.

People often forget their investments made early in life. All brokerage firms, banks, and financial organizations report unclaimed properties and dormant bank accounts to the government for escheatment. However, they must first attempt to contact the owner by sending reminders or notices for a period of three to five years (subject to the jurisdiction and the asset type) before beginning the escheatment process. After the government seizes the assets, it holds them for a limited time. And then it liquidates them with proceeds going to the state. One can avoid escheatment by monitoring accounts, updating information, and cashing in on profits.

It is often seen that many people do come back claiming their rights to the escheated property or asset. As a result, different nations have introduced escheatment laws, for example, time limit. If a claimant can prove their case, they will receive the cash value of the asset at the moment the state escheated it. However, they must provide proof of identity, special documentation, and legal ownership rights to the government. There are various online resources to help individuals learn about unclaimed assets and inactive accounts in their jurisdictions before filing a claim.

Let us look at the following examples to understand the escheatment process better:

Example #1

Amber is a Kentucky-based investment banker. She made a lot of investments because she is a professional with a solid income. Amber purchased insurance policies, put money into her bank accounts, and invested in stocks. She had substantial savings from her internships and freelance assignments in one of the bank accounts she opened while earning her Master's in Finance in Illinois. However, she had to relocate to Kentucky to take her first job at a financial institution.

She misplaced her suitcase, which contained financial paperwork while traveling. Worse, she had forgotten the password to her bank account's email account. Amber intended to contact the bank when she arrived in Kentucky. But she promptly forgot about it as she became preoccupied with her job and life. The Illinois bank deemed her account dormant and reported it to the state after waiting three years as required by escheatment laws. The bank attempted to contact Amber via email and mails but received no answer due to her change of address and lack of access to email.

Her savings have gone unclaimed in such a case. Fortunately, Amber remembered the incident while talking to her friend Maya one day. Maya recommended an internet resource where Amber can learn more about her unclaimed assets. She found the information she needed in the database. She claimed it and gave the authorities proof of identification, required paperwork, and legal ownership rights. Her claim was deemed genuine, and she was given the cash equivalent of her assets at the time of escheatment.

Example #2

In France, the public auditor (Cour des Comptes) urged the lower house of parliament to intervene to protect the owners and heirs of dormant bank accounts and unclaimed life insurance policies. The president of the Cour des Comptes, Didier Migaud, estimated 2.76 billion euros in unclaimed life insurance policies and 1.2 billion euros in dormant bank accounts as of 2011.

According to French law, an abandoned property can only be turned over to the state after 30 years. As a result, French banks continue to charge inactive account fees and make little effort to locate account holders. Migaud suggested that rules be changed, fees on inactive accounts are capped, and unclaimed assets be transferred to the public bank, Caisse des Depots.

This has been a guide to what is Escheatment and its Definition. Here we discuss how does escheatment process work, along with examples. You can learn more about finance from the following articles –

• Living Will
• Trust Fund
• Immediate Family