Escheat - Explained
What is Escheat?
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What is Escheat?
According to the United States law, an escheat is a process of reversing ownership of a persons property to the state, in case the person dies without an heir or they go missing for a long time. In an escheat, a person loses all assets, including bank accounts to the state if there are no named heirs, beneficiaries, or descendants to take over the owners property. In feudal England, the king was privileged to receive all the property under escheatment. The inheritance policy ensured that the wealth of honorable families was preserved, and only permitted an estate to be inherited by one noble person. Writing of wills to leave property to many heirs was not allowed as it would destroy the estate. By law, the leaders established a hierarchy of heirs, and the heirs inherited the entire estate at different times. In case there was no heir to take over the estate, the king escheated the property.
How does an Escheat Work?
Most states in the US have a law that states that any corporation that is holding a dead or a missing persons property, cash, or goods must dispatch it to the state. The state has the responsibility of finding the rightful heir or the property or hold it until the person comes to claim back their property. If the missing person reappears to claim their property, then the state follows a procedure to redeem the property back to the owner. The person claiming the property must meet various conditions before the law releases the property. The conditions often vary from one state to another, and the law will apply depending on the state that the property lies. Also, when an individuals deposit account remains dormant, and it still holds some money, the state does not allow the banks to keep the money to themselves. After a certain period, the banks should hand over the deposits to the state for safe-keeping. Every state has its time limits for the banks to undertake an escheatment process. The cash owner has the right to come and revoke the state ownership by claiming back their money. An escheatment can also happen when the property owner commits a crime, and the court executes him/her for the crime. In case the person has heirs, but they are not eligible for inheritance, then ownership of the property goes to the state. However, the United States law forbids this type of escheatment.
Property subject to an Escheatment
Apart from money in the deposit account, an escheat can also include:
- Traveler checks and money orders
- Checking and savings accounts
- Cashier checks or uncashed payroll
- Life insurance policies and proceeds
- Bonds, stocks, mutual funds, brokerage accounts, and dividends
- Overpayments and customer deposits
- Accident and health insurance payments
- Gas and oil royalty payments
- Christmas club accounts and gift certificates
- Certificates of deposit
- Utility deposits and Vendor deposits
- Uncashed benefit checks for death
- Pensions and annuity contracts
- Credit balances and refunds
- Uncashed money orders
The state cannot take ownership of property without following lawful procedures. The laws need to work within the limits of the constitution and the due process. The state should notify the public about the escheat before starting the process to allow the claimants to claim their property. The banks usually charge a fee before an escheat of property. Some banks will charge monthly service fees for the accounts, but a fee on dormant or inactive accounts. When they charge monthly fees on the dormant accounts for maintenance, the account balances become something little.
Claiming Assets on an Escheat
The escheat handling process varies in different jurisdictions. Some states have online registers where they maintain a list of inactive assets. The registers are useful when rightful owners want to claim their properties from the state since the state allows the revocation of an escheat. An individual seeking to reclaim their assets under an escheat should be fast because the state may sell off the assets to fund other state projects. The period an individual has to claim an uncashed benefit check ranges from one to seven years, depending on the state. An individual can start by checking the database of unclaimed assets in their state to find the assets they can claim. After finding the property, there is a claiming process that the state requires them to follow before they get back their property. The office of unclaimed property requires the claimant to provide proof of ownership by providing their name, address, and social security number. The individual may need to fill forms so the state can verify the ownership of the property before revoking the escheatment. In case the money is not in the name of the claimant, he has to provide proof that he is the beneficiary. After submitting the claim form, it may take up to two months for the claimant to recover their property.
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