How Can You Reclaim Unclaimed Property?

Unclaimed property generally consists of unclaimed money in financial and bank accounts that have sat dormant for more than a year. Each state has a process by which unclaimed property can be identified and reclaimed; these returned assets are worth billions of dollars every year.

Find out how to check if you have any unclaimed property and how to claim it.

Key Takeaways

• Unclaimed properties are assets or funds for which the rightful owner cannot be located or has left the account dormant for a prolonged period.
• Typically unclaimed funds and property are handed over to the state where the assets are located after a dormancy period has passed.
• States have established processes whereby legal owners of assets can reclaim unclaimed funds.
• When claiming unclaimed funds that have risen in value, taxes may be assessed on the current value of the property.
• If you claim property, it will be treated as ordinary income and taxed accordingly unless the property is related to a tax refund.

Reclaiming Property

The process for reclaiming unclaimed or escheated property varies by state, as the federal government does not have a central website for finding unclaimed property. Most state websites are similar in format and often fairly simple to navigate. The office of the comptroller is usually the official agency tasked with managing the list of unclaimed property.

Funds associated with unclaimed property may be absorbed and used in state operating expenses. Still, unclaimed property funds are nearly universally kept track of as debt to the property owner on record.

Once you’ve identified the website where unclaimed property queries are made, you can use criteria such as first and last name, business name, ZIP code, and city associated with the property to locate it.

Important

Many government agencies are prohibited from contacting owners of unclaimed funds/assets by phone. Scammers are aware of this limitation and may attempt to defraud individuals by claiming to have records of unclaimed property.

Unclaimed Property and Dormancy Period

Unclaimed property is essentially property that has gone unclaimed beyond the dormancy period. The dormancy period is the amount of time between when a financial institution reports an account or asset as unclaimed and when the government deems that account or asset to be abandoned.

For most states, the dormancy period is five years. When a property is officially designated by the state as abandoned or unclaimed, it undergoes a process known as escheatment. The state assumes ownership of that property until the rightful owner files a claim.

Depending on the state, the comptroller or state treasury office may make attempts to locate the rightful owner of the unclaimed property. Methods may include mailing notifications to the last listed address of residence or employment. Property can often go unclaimed when the owner fails to report a new mailing address, so that this method can be less successful. States may also subscribe to online contact databases that could have more up-to-date information.

Escheatment

After the dormancy period, dormant accounts become unclaimed property. At this point, state have escheatment statutes take effect.

Escheatment state laws require companies to transfer unclaimed property from dormant accounts to the state general fund. This fund takes over record-keeping and returning of lost or forgotten property to owners or their heirs if the owner has passed away. This protects the unclaimed funds from reverting to the financial institutions at which they are held.

Owners can gain back the unclaimed property by filing an application with their state at no cost or for a nominal handling fee. Because the state keeps custody of the unclaimed property in perpetuity, owners can claim their property at any time.

A dormant account with no activity for a long time, other than posting interest, is also a potential case of unclaimed property. A statute of limitations usually does not apply to dormant accounts, meaning that funds can be claimed by the owner or beneficiary at any time.

Note

Financial institutions are required by state laws to transfer resources held at dormant accounts to the state’s treasury after the accounts have been inactive for a certain period. The length of this period varies by state.

Unclaimed Property and Taxes

Types of unclaimed property include uncashed payroll checks, inactive stocks, court funds, dividends, checking and savings accounts, and estate proceeds. When property accounts go unclaimed, they are turned over to the state for reasons that may include:

• Death of the account holder
• Failure to register a forwarding address after changing residence,
• Forgetting about an account

Unclaimed property is not taxed while it is filed as unclaimed; however, the property may be officially recognized as taxable income when it is reclaimed. Some unclaimed funds such as investments from a 401(k) or an IRA can be reclaimed tax-free.

Example of Unclaimed Property

According to the Office of the New York State Comptroller, the state returns an average of $1.5 million in unclaimed property to people who file claims each day. As of May 2024, the state had returned $184 million since the start of the year. In addition, every year, the Internal Revenue Service (IRS) has millions in unclaimed federal tax refunds. While there is no centralized database for unclaimed funds, you can visit USA.gov’s unclaimed money from the government page and check the various links to sites that can help you find unclaimed money.

What Kind of Assets Can Be Unclaimed Property?

Unclaimed property is often cash, such as dormant bank accounts, tax refunds, or payroll checks. However, it can also include a variety of assets, such as stocks, dividends, bonds, utility deposits, insurance payouts, and tangible property.

What Is an Example of Tangible Unclaimed Property?

Tangible unclaimed property is physical property, rather than intangible property such as an uncashed paycheck. An example of tangible unclaimed property could be the contents of a safety deposit box that was abandoned or inherited.

Do All States Have Unclaimed Property Laws?

All states have unclaimed property laws, however, these laws differ from state to state. Unclaimed property is managed by the rules and regulations of the state where the property is held, not the state in which you currently reside.

The Bottom Line

Unclaimed properties are assets for which the owner can’t be located. These properties can be tangible, such as the contents of a safety deposit box, or intangible, such as unclaimed tax refunds. Unclaimed property can also be accounts that have been dormant for a prolonged period.

Unclaimed property is usually handed over to the state in which the assets are located after the end of the dormancy period. States then have rules and regulations governing how the legal owners of these assets can reclaim their property. Reclaimed property is treated as income and subject to ordinary income tax rates, unless it is related to a tax refund.

Read the original article on Investopedia.