What Is Escheat?
Escheat is the right of a government to assume ownership of estate assets or unclaimed property when there are no heirs or beneficiaries. This can occur when assets sit unclaimed for an extended period. These scenarios can also be referred to as bona vacantia or simply unclaimed property.
The primary concept of escheat is that property must always have a recognized owner, and if no rightful owner exists or can be identified, the ownership defaults to the state or federal government. In the United States, each state has its own set of laws and regulations regarding escheat rights and related procedures.
Key Takeaways
- Escheat refers to a government’s right to take ownership of estate assets or unclaimed property.
- This can happen when property remains unclaimed for several years.
- Escheatment is formalized through probate or other court proceedings.
- Each U.S. state has distinct rules and procedures for escheat rights.
- Most states have processes for automatically transferring assets from dormant accounts after a specified period.
Understanding Escheat
Escheat is a government’s right to take over a property if it remains unclaimed for an extended period. Escheat rights can be granted through a court of law or after a standard time period. In the case of death without a will or identifiable heirs, states may be granted escheat rights in probate decisions.
Across the U.S., each state enforces different rules and regulations regarding escheat. Properties that have been escheated can oftentimes be reclaimed. Some states include a statute of limitations for reclamation—an expiration date after which reclaiming property is no longer possible.
Escheatment involves transferring assets to the state. Although escheat rights are often revocable, meaning ownership could revert to a lawful heir or owner if they come forward, an absent statute of limitations can extend such rights indefinitely.
Understanding the process by which different types of assets become escheated is crucial. Financial institutions and brokerages maintain records of dormant accounts, which are labeled as such following a period of inactivity. These accounts typically must be turned over to the government based on timelines set by each state. Financial institutions are required to make efforts, like sending reminders and issuing notices, to locate the owners before final escheatment to the state.
Here are some of the financial accounts that can be escheated:
- Checking accounts
- Brokerage accounts
- Retirement accounts
- Annuity contracts and accounts
- Pension accounts
- Savings accounts
Escheat and Death
In the event of death, estate assets with no will are considered intestate and usually go through probate court for determination. Intestate deaths involve thorough research to locate potential heirs. Common heirs can include spouses, siblings, aunts, uncles, nieces, nephews, cousins, and more.
Should a probate court find no eligible heirs, it would grant escheat rights to the state. Escheat may also occur with defective wills or trusts where legal heirs to an estate cannot be identified. Nonetheless, identifying heirs usually negates the need for escheatment, although it can come into play if no rightful heirs are found or identified heirs are deemed unable to manage the inheritance.
If a rightful heir resurface post-escheatment, property can be reverted to such heirs as outlined by corresponding laws, which can differ from state to state. These laws sometimes include a statute of limitations that could render asset ownership rights irrevocable after a certain period.
Escheatment of Unclaimed Assets
State governments can be granted escheat rights for various types of assets, including real estate, bank deposits, and unclaimed securities forgotten in dormant accounts. Financial institutions are generally required by specific state laws to systematically transfer these dormant accounts to the government.
Each state determines the dormancy period for assets like checking accounts, savings accounts, and uncashed bank checks before granting escheat rights to the government. Often this period spans a few years but might vary. Below is a table summarizing dormancy periods across different states:
| State | Checking/Savings Account | Bank Checks | Wages |
|---|---|---|---|
| Alabama | 3 years | 3 years | 1 year |
| California | 3 years | 3 years | 1 year |
| Florida | 5 years | 5 years | 1 year |
| … | … | … | … |
(Note: The complete table including all states can be found in the downloaded document or the specific state’s official website.)
Escheat Reclamation
Many states keep online databases of unclaimed assets and ensure these are up-to-date with the National Association of Unclaimed Property Administration. Accessing and claiming unclaimed property can be managed through online searches. However, reclamation is bound by state laws, often guided by a statute of limitations that limits the claim period.
Various measures protect states investing assets or using funds by imposing these statutory limits, placing curbs on the reclaiming of certain assets after extended periods.
Common Questions on Escheat
What does it mean when an account is escheat?
An account enters escheatment when there are no identifiable heirs, or no one claims it, causing the government to take ownership. Legal reversion is possible if a rightful owner is later identified.
What does escheat mean in law?
Escheat denotes the government’s right to take control of an account if it remains unclaimed or without a claimant after the owner’s death.
What is an escheat example?
Imagine you hold assets in a brokerage account without beneficiaries, a will, or surviving relatives. In your passing, if no one claims the account, the ownership transfers to the government under the state’s escheat laws.
The Bottom Line
Escheatment permits governments to take over unclaimed accounts or property when there are no discernible beneficiaries, heirs, or other rightful claimants. Escheat properties can often be reclaimed by legal claimants, but this process remains subject to a statute of limitations.
Related Terms: bona vacantia, probate, intestate, statute of limitations, dormant accounts
References
- National Association of Unclaimed Property Administrators. “State-by-State Reporting Information.”
- National Association of Unclaimed Property Administration. “Search”.
