Two women playing a game after learning about the escheatment process.

4 minute read

Understanding the Escheatment Process

How exactly does the escheatment process work? How long does it take? And what can you expect for reclamation? Trust & Will explains what you need to know.

Patrick Hicks

Patrick Hicks, @PatrickHicks

Head of Legal, Trust & Will

Personal and real property are typically left to heirs and beneficiaries when the head of an estate dies. Wills and Trusts — along with several other financial vehicles — are specifically designed to allocate a decedent's assets to subsequent owners. That said, there are always exceptions. It is entirely possible for some property to slip through the cracks and go unnoticed for years at a time. 

When the real owner of property can’t be found, for any number of reasons, the state in which the assets are held has the right to claim ownership of them through the escheatment process. In other words, individual states may legally claim property that hasn’t been claimed by anyone else, as long as no owners with a claim to the property come forth during the dormancy period.

The escheatment process is something everyone should hope to avoid. There’s no benefit to anyone’s legacy when the state can reap the rewards of its hard work. As a result, it’s best to educate yourself on everything that has to do with the escheatment process, including:

What Does the Escheatment Process Entail?

Unofficially, the escheatment process begins the moment property in a qualifying account is left unattended for too long. Otherwise known as the dormancy period, all banks, financial institutions, and brokerages are required to notify their respective state governments when assets sit idle for approximately one to five years (the dormancy period duration depends on the state the assets reside in). It isn’t until the state receives word of the inactivity that it can officially initiate the escheatment process. 

The first step in the escheatment process will witness the state build a case in a court of law to claim the property. In doing so, the state government will attempt to identify any legal heirs, owners, or beneficiaries (or anyone with unclaimed inheritance in a Will). If the state (or corresponding financial institution) is able to get in contact with someone who has a legal claim to the property, the individual will be able to file a subsequent claim to become the new owner. However, if no legal owner can be found, property will move one step closer to being escheated by the state. 

Once the property is in possession of the state, the government must proceed to hold the assets through a waiting period. While each state has its own statute of limitations on the waiting period, the window is designed to give potential owners one more opportunity to claim what is rightfully theirs. If, however, the statute of limitations expires, the state officially becomes the legal owner.

In the event property is escheated to the state, it will proceed to liquidate the assets and allocate the proceeds to the local government.

How Long Does the Escheatment Process Take?

The length of the escheatment process is entirely dependent on the state in which the assets are held. That said, it can take anywhere from 1 to 5 years to simply identify an inactive or abandoned account. Once the state has been notified, it will move as quickly as possible to claim the subject property. In other words, the escheatment process can move fast once the dormancy period expires.

While the escheatment process can take as long as five (or more) years to name the state the legal owner of unclaimed inheritance, those looking to claim property back from the state can expect a slightly shorter time frame. 

Once all of the legal documents are submitted and reviewed by the state, a final decision for reclamation will typically take anywhere from 90 to 120 days. Following the decision to release the funds, prospective owners can expect the claim to take upwards of two years to complete. The duration of the claim will ultimately depend on the legal representation, but expect a lengthy process, nonetheless.

Escheatment Laws by State

Each state governs the escheatment process differently. While there are many universal similarities, the specifics of each state’s rules and regulations will be reflected in their own unique way.

For starters, each state will set its own dormancy period (the amount of time a financial institution allows an abandoned account to sit idle before it notifies the state). Some states may require financial institutions to report idle or abandoned accounts after a single year. Other states, however, may allow accounts to remain idle for as long as five years before they require the institution to report inactivity.

What is the Process for Reclaiming Escheated Funds?

The process for reclaiming escheated funds will vary from state to state, so there are no universal steps to abide by. However, it’s safe to say the state you want to reclaim funds in will require proof that you have a legal claim to the property in question. Most states will require you to provide proof of ownership or justification for a legal claim. State Comptroller Offices won’t entertain any application for reclamation if it isn’t accompanied by proof of ownership. 

In the event you do have proof of a legal claim, and the state has verified the credentials to be true, the government will allow you to submit a claim form for the property in their possession. As long as the claim is made before any statute of limitations expires, the state will be obligated to release the property back to its rightful owner.  

Avoid the Escheatment Process by Updating Your Will Today

The escheatment process was specifically designed to make sure property always has a legal owner; so that it’s never in a perpetual state of limbo. That said, most people would prefer to never have to be subjected to the escheatment process. Not only does the prospect of losing property you are legally entitled to sit wrong with most people, but the process is as arduous as it is annoying. 

Fortunately, there are steps you can take to avoid the escheatment process altogether. Drafting a  comprehensive end-of-life plan that accounts for all assets and beneficiaries is a great first step.  Here at Trust & Will, we’re here to help keep things simple. You can create a fully customizable, state-specific estate plan from the comfort of your own home in just 20 minutes. Take our free quiz to see where you should get started, or compare our different estate planning and settlement options today! 

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