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Reporting or Retrieving Unclaimed Property

Filed under Basic Accounting. Fact checked on May 24, 2012.

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States and the federal government hold billions of dollars in property deemed abandoned by its owners. You can make your claim to any unclaimed property listed in your name.

People love the idea of suddenly striking it rich. If you don't believe this is true, consider the popularity of buying state lottery tickets.

Based on fiscal year 2010 statistics, a population of almost 309 million US residents spent a combined total of $52.3 billion on state lotteries during the year. This breaks down to every person in the US having spent $169.25 on lottery tickets pursuing the elusive get-rich-quick fantasy.

In contrast, the Commerce Department reported in early 2006 that Americans' personal savings rate dropped into negative numbers in 2005, which hasn't been seen since the Great Depression. This means that, after paying taxes, people spent all their disposable income and also had to dip into their personal savings to help finance purchases. The Bureau of Economic Analysis recently released figures for the first three quarters of 2010, showing that the savings rate has risen into positive territory at around 5.7 percent.

Though not directly related, the two sets of statistics above can be viewed as two sides of the same coin. Americans are increasingly finding it harder and harder to build wealth as their disposable income shrinks. At the same time, the idea of suddenly finding a new and easy source of wealth is becoming more appealing than ever.

Many people, however, are unaware of a great source of wealth that can be found right in their proverbial backyards. Much like an untapped oil well or pirate treasure buried under their very noses, millions of people are literally missing out on billions of dollars worth of property each year. This secret source of untapped wealth is unclaimed property.

Unclaimed Property Overview

Each year, individual states (and in some cases the federal government) receive property such as:

  • unclaimed wages
  • gift certificates
  • bank accounts
  • safe deposit box contents

These are presumed abandoned after a period of inactivity by the rightful owner. According to 2006 National Association of Unclaimed Property Administrators statistics, states paid over 1.9 million claims to owners worth at least $1.7 billion. Unfortunately, the majority of property collected by various government agencies over the years never gets claimed.

Getting your rightful share of this bounty is easy and involves minimal effort. After all, the hardest part was accumulating the wealth in the first place before losing track of it.

Though relatively straightforward, unclaimed property procedures are not without some risks. For the rightful owners of the property, the main risk is the very real potential of having their property lost forever. For businesses holding property that remains unclaimed, states have various reporting and delivery requirements that include stiff penalties for failure to comply.

How Unclaimed Property Works

When property is abandoned, ownership of the property escheats (reverts) to the state. The common law doctrine of escheat originated in feudal England. When a land owner (tenant of a fief) died without an heir or committed a felony, some mechanism was needed for the ownership of the land to automatically revert to the immediately superior feudal lord. With a smooth and quick transfer of ownership, the king was assured of continued productive use of the land, especially an uninterrupted revenue stream up the feudal chain.

Though a long way from its origins in feudalism, the application of escheat principles is still alive and well today. With reversion of property by operation of law, government entities ensure that property does not remain in limbo and continues to be put to some use.

There are two main scenarios where escheat comes up today. The first situation involves the transfer of a deceased person's property to the state when the person dies without a will and there are no heirs available to take the property. In such cases, property reverts to the state as a last resort.

The second major area where escheat pops up, and the topic of discussion here, involves unclaimed property. Various entities, such as financial institutions, employers and retail establishments, often hold money or property that for one reason or another goes unclaimed. In such cases, the unclaimed property must be turned over to the government after a set period of time if the owner cannot be located.

Each government entity holding unclaimed property has mechanisms in place to try and locate the rightful owners and return their property. Unfortunately, most of the collected unclaimed property continues to remain unclaimed. Meanwhile, the government gets to use billions of dollars worth of property until somebody can make a claim for its recovery.

How to Avoid Accidentally Abandoning Property

Losing a sock is very easy. Given the tendency of washers and dryers to randomly propel socks into another dimension, this is totally understandable.

What is more puzzling, however, is how millions of dollars worth of property, such as unpaid wages, bank accounts, and various financial instruments, can be inadvertently abandoned each year. Yet, it still continues at an alarming frequency.

The key here is organization, or the lack thereof. A gift card or money order may be shoved in a random drawer, then covered over and forgotten. Banks, investment companies, and former employers may lose track of a person who moves one too many times without providing a forwarding address. A person may simply die, leaving heirs clueless as to the deceased's many property interests.

The above forms of disorganized behavior are surefire ways to turn any type of property into unclaimed property. The preventative medicine for this situation is to get organized and stay that way.

To help prevent your money from becoming unclaimed and keeping it that way, follow these simple practices:

  • keep accurate and regularly updated financial records and store them in a safe location
  • notify a family member or trusted advisor of the location of your records
  • list all bank accounts, stock certificates, insurance policies, utility and other deposits, and your safe deposit box number and keep them with your other financial records
  • cash all checks, money orders and similar financial instruments
  • store all gift cards, certificates, checks, etc. in the same location
  • do not let savings and other accounts remain idle; instead, perform at least some transaction every two to three years
  • answer your mail from the institutions (such as banks, insurance companies, investment companies, etc.) that hold your money
  • if you move, notify every institution you do business with of your new address
  • if you move or travel frequently, consider using a single mailing location, such as a post office box, to prevent correspondence from being lost in the mail
  • prepare, file and regularly update a will listing the disposition of your assets after death
  • review and repeat all of the above on a regular basis.

Though the unclaimed property recovery process is relatively easy, keeping track of your property at all times is better. That way you can have your assets work for you instead of the sitting in some government unclaimed property account.

Federal Agencies That Hold Unclaimed Property

Most commonly, unclaimed property incidents and claims occur at the state level. In addition, it is worth mentioning that billions of dollars worth of unclaimed property are held by various federal agencies.

The major holder of unclaimed property at the federal level is the Internal Revenue Service. The most recent statistics indicate that the IRS is holding $146.6 million in unclaimed refund checks. Undeliverable refund checks average $1,471.

Taxpayers who believe they are owed a refund can check the "Where's My Refund?" feature on the website. To use it, your must enter your Social Security number, filing status (such as single or married filing jointly) and the refund amount shown on their current tax return. Once the information is submitted, "Where's My Refund?" will show the status of the taxpayer's refund.

If you've moved since filing your last tax return, you can provide the IRS with the correct mailing address by filing Form 8822, Change of Address, with the IRS. This form can be downloaded from or taxpayers may request it by calling (800) TAX-FORM.

To avoid future undelivered refunds, taxpayers can choose to have their refunds sent directly into a personal checking or savings account through direct deposit. This option is available for both paper and electronic return filers.

Rather than giving the IRS money they didn't earn, direct deposit might be the best way to go if there is any chance a taxpayer expects an address change in the foreseeable future. As an added bonus, direct deposit gets refunds to the taxpayer a week sooner than issuing a check.

Additional Unclaimed Property-Holding Federal Agencies

If you or anyone in your family ever owned a savings bond, you should know that over 15,000 savings bonds and 25,000 payments return to the Department of the Treasury as undeliverable each year. Also, over $15 billion worth of uncashed savings bonds have stopped earning interest.

The Treasury Department's Treasure Hunt searchable database allows you to search the records for registered Treasury notes and bonds. There are limitations with this system, however.

For example, the database cannot help you search for savings bonds that you've lost. Also, the database only includes savings bonds returned to Treasury as undeliverable since 1996.

U.S. Department of Housing and Urban Development (HUD)

If ever you had an FHA-insured mortgage, you may be unaware that you are eligible for a mortgage insurance refund from HUD. To check this potential source of unclaimed money, search the HUD database to find out if you are due a refund.

Pension Benefit Guaranty Corporation (PBGC)

In April of 2007, the PBGC reported that it is holding $133 million in unclaimed pension benefits for 32,000 people owed money from terminated defined benefit pension plans. To assist people who may have lost track of their pension, the PBGC has offered since 1996 the Pension Search directory. Searches can be done by last name, company name or state where the company was headquartered.

Federal Deposit Insurance Corporation (FDIC)

The FDIC provides deposit insurance to financial institutions and their depositors. When an insured financial institution is liquidated, the FDIC frequently retains the following unclaimed payments:

  • insured deposits up to $100,000 and in some cases $250,000
  • dividends declared on excess deposits over the insured amount
  • dividends declared on general creditor claims
  • funds distributed to the shareholders of the failed institution

The above funds remain unclaimed for various reasons, including failure to cash FDIC checks and checks being returned as undeliverable due to an invalid address. However, depositors can reclaim the funds they are entitled to after finding their names in the FDIC unclaimed funds database.

Remitting Unclaimed Property to the State

The bulk of unclaimed property activity occurs at the state level. In 2006, for example, over 1.9 million state claims were paid to owners totaling at least $1.7 billion. However, many more billions of dollars worth of unclaimed property funds have yet to be distributed and this amount continues to grow each year.

Whether you are a business holding unclaimed property or an individual or business trying to recover abandoned property, each state has its own specific laws and procedures to follow. There are, however, some common themes found across all the states.

Guidelines for Most States

Businesses must be aware that they have a number of responsibilities concerning unclaimed property. Initially, written notice must be sent to the apparent owner of the unclaimed property, if known. If the property remains unclaimed, businesses have a number of filing and reporting requirements to fulfill. Most importantly, businesses are required to turn over any and all unclaimed property to the state. Stiff penalties apply to businesses who fail to comply with any of these requirements.

On the other hand, individuals should know that property located in each particular state is generally presumed abandoned after a certain period of inactivity by the owner. This time limit varies depending on the type of property involved. Once abandoned property is turned over to the state by a business, an individual then has the burden of reclaiming it from the state. Also, always remember that if unclaimed property is located in more than one state, the recovery procedures of each state must be followed separately to get all the property back.

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