You might not know that unclaimed property is governed by state laws. For example, if a bank account is inactive for an extended period of time, your state can claim the funds in your account in a process known as escheatment. What is escheatment?
Definition of escheatment
Escheatment is the process of a financial institution handing over unclaimed property to its state. That includes bank accounts, assets, or any other property unclaimed for an extended period of time. And, if a person dies without leaving a beneficiary to their property, it becomes escheated, or claimed by the state.
Escheated accounts are known as dormant, abandoned, or unclaimed. Dormant, abandoned, and unclaimed accounts are ones that have no activity for a specific period of time. States can escheat the accounts.
Financial institutions, like banks, are responsible for reporting unclaimed property to the state after a certain amount of time. Each state has a different time frame before the state escheats property.
If you had property that has been escheated, you can reclaim your property by applying to your state.
What does the state do with escheated property?
After the escheatment process, the state has the right to the escheated property. Many times, the state sells the securities and uses the money toward state funds.
States give a second chance to people whose property has been escheated. The original property owner applies, and if their claim is accepted by the state, the state sends them a cash equivalent. The cash equivalent equals the property value at the time it was escheated.
However, some states have a time limit on when you can claim property after it has been escheated. Make sure you stay current on your state’s laws.
When a check expires without having been claimed, it is an escheated check. Some examples of escheated checks include payroll and traveler’s checks.
If you send a check to a vendor, employee, or customer, there’s a chance they might not receive or remember it. As a result, they do not cash the check. The check then becomes escheated and the state gets the funds.
The payee who did not cash their check before it became escheated can apply to their state to claim it.
Escheatment laws by state
Different states have rules for when a state can escheat an account or asset.
The table below lists escheatment laws by state for bank accounts, checks/drafts, and wages/salaries.
Time Before Escheatment: Different Accounts by State
|Alabama||3 years*||1 year||1 year|
|Alaska||5 years||5 years||1 year|
|Arizona||3 years||3 years||1 year|
|Arkansas||3 years||3 years||1 year|
|California||3 years||3 years||1 year|
|Colorado||5 years||5 years*||1 year|
|Connecticut||3 years||3 years*||1 year|
|Delaware||5 years||5 years||5 years|
|District of Columbia||3 years*||3 years||1 year|
|Florida||5 years||5 years||1 year|
|Georgia||5 years||5 years||1 year|
|Hawaii||5 years||5 years||1 year|
|Idaho||5 years||5 years||1 year|
|Illinois||5 years||5 years||1 year|
|Indiana||3 years||3 years||1 year|
|Iowa||3 years||3 years||1 year|
|Kansas||5 years||2 years||1 year|
|Kentucky||3 years||3 years||3 years|
|Louisiana||5 years||5 years||1 year|
|Maine||3 years||3 years||1 year|
|Maryland||3 years||3 years||3 years|
|Massachusetts||3 years||3 years||3 years|
|Michigan||3 years||3 years||1 year|
|Minnesota||3 years||3 years||1 year|
|Mississippi||5 years||5 years||Not specified|
|Missouri||5 years||5 years||Not specified|
|Montana||5 years||5 years||1 year|
|Nebraska||5 years||5 years||1 year|
|Nevada||3 years||3 years||1 year|
|New Hampshire||5 years||5 years||1 year|
|New Jersey||3 years||3 years||1 year|
|New Mexico||5 years||5 years||1 year|
|New York||3 years||3 years||3 years*|
|North Carolina||5 years||7 years/5 years*||1 year|
|North Dakota||5 years||2 years*||2 years|
|Ohio||5 years||5 years||3 years|
|Oklahoma||5 years||5 years||1 year|
|Oregon||3 years||3 years||3 years|
|Pennsylvania||3 years||3 years||2 years|
|Rhode Island||3 years*||3 years||1 year|
|South Carolina||5 years||5 years||1 year|
|South Dakota||3 years||3 years||1 year|
|Tennessee||5 years||5 years||1 year|
|Texas||5 years||3 years||1 year|
|Utah||3 years||3 years||1 year|
|Vermont||3 years||3 years||1 year|
|Virginia||5 years||5 years||1 year|
|Washington||3 years||3 years||1 year|
|West Virginia||5 years*||5 years||1 year|
|Wisconsin||5 years||5 years||1 year|
|Wyoming||5 years||5 years||1 year|
* Indicates that there are more in-depth rules from the state
For more terms and conditions, as well as escheatment laws for different accounts and assets, contact your state department of unclaimed property.
If your employee doesn’t cash a payroll check in time, it could become escheated. Patriot’s online payroll software stores your payroll history for you so you can keep track of each pay period. Try it for free today!
This article has been updated from its original publication date of December 16, 2016.
This is not intended as legal advice; for more information, please click here.