Escheat Generally:

Escheat is the most commonly used term for the abandoned or unclaimed property statutes of the 50 states, the District of Columbia, Puerto Rico, Guam, and the Virgin Islands. These statutes require the state administrators to hold the property indefinitely for the missing owner (or his heirs).

Escheat is based upon several basic presumptions:

1. the owner has forgotten about his property if he fails to contact the company holding the property during the dormancy period;
2. the state administrator is the best entity to serve as the custodian of the property unless and until the owner is located; and
3. the company holding the owner's funds has no right to retain the property after the dormancy period has expired.

The current statutes are our version of the British doctrine of "bona vacantia" (vacant goods). Under that doctrine, the personal property of one who died without heirs passed to the Crown. Our version is more democratic; title does not pass, only possession. The owner, his personal representative or heirs can claim at any time.

These statutes are, for the most part, based on model legislation recommended by the National Conference of Commissioners on Uniform State Laws. Although some forty states have adopted one of the four versions of the Uniform Unclaimed Property Act, the statutes are far from uniform!

Generally speaking, all intangible personal property (uncashed checks, forgotten deposits, unredeemed dividends or interest, etc.) is presumed abandoned after the lapse of the dormancy period - unless the state legislature has explicitedly exempted a category of property, such as gift certificates, state retirement benefits or state lottery winnings.

The company (usually referred to as "the holder") which is still holding the funds because, for example, the owner has not cashed a check must use due diligence to locate the missing payee. If the company can not do so, the funds and the owner's name, address and date of last contact must be reported to the appropriate state administrator.

If the funds are not reported, the state may assess interest, civil fines and, in certain cases, criminal penalties.

Escheat is "big business." Collectively the states are holding nearly one billion dollars. Many states receive thirty or more million dollars each year. The property which the states are unable to return to the missing owners can be used by the state until the owners reappear.

The states often use collection firms, usually on a contingent fee basis, to audit for unreported escheatable property. The result of one such audit was a $51,000,000 payment to the Delaware Escheator.

Professional Links:

UCP Reference Book 

UPPO

NAUPA