Beware: States Are Tapping into Residents' Abandoned Accounts - For What It's Worth - Comcast.net Finance

Do you have an account that you haven't checked up on in a while? If so, it's probably a good idea to look into that… and fast.

That's because escheat laws, which have been implemented to collect unclaimed property, allow each state to deposit abandoned funds into a giant "lost and found." While this is nothing new, some states have been taking the process a step further by emptying this lost and found into their general funds to cover budget shortfalls, according to a Bankrate.com article by Claes Bell.

Consider Bell's anecdote about Madonna Suever of Oregon, who went to deposit her mother's cashier's check for over $16,000, which was given to her from the estate of an uncle after he passed away in 1986. When Madonna went to open a savings account in her mother's name with Wells Fargo & Co., the bank notified her of insufficient funds. The money, it turned out, had been escheated to the state.

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Or take Chris Taylor, a former Intel Corp. employee who had millions of dollars worth of stock in a company stock plan. The division keeping track of his stock reported it as unclaimed property to state auditors, who later sold a chunk of his investment. He didn't learn of this until he was making plans to retire, according to Bell. A little too late…

States learn about unclaimed property when financial institutions include it in a required yearly filing or when it's discovered in an audit. But the numerous ways accounts can fall into the "abandoned" or "unclaimed" category is what's worrisome. The article goes on to explain:

"Accounts become 'abandoned' in a number of ways. You can fail to cash a check, forget to update the address on the account, fail to respond to a proxy statement or simply fail to make contact with your financial institution for a 'defined period of time,' says [Jennifer] Borden, [an attorney with Holland & Knight based in Boston]. That can range anywhere between just three and seven years, but, she says, 'the definitions can get a little sketchy.'"

Once an account reaches the abandoned pile, the institution may try to contact you via phone or mail. But if your address is wrong or you don't respond to the message, the escheat process begins.

To be sure, some states are much better than others at returning unclaimed property. Florida, Tennessee and Nebraska, for example, are very proactive and have returned $38 million of unclaimed property in recent years, according to Bankrate's Bell.

Delaware, on the other hand, is known to do a poor job of giving money back. Escheat is now the state's third-largest revenue source. What's more, in 2008, Delaware joined 25 other states in shortening the period of inactivity for abandoned accounts from five years to three years.

Worried about this happening to your funds? In order to avoid having your assets confiscated as unclaimed property, Bell offers the following tips:

• Keep your address up to date with all financial institutions and employers.
• Cash all checks.
• Open all mail from financial institutions.
• Keep a list of all accounts and account numbers.

In short, be proactive with all of your accounts. Your cash isn't stashed away under your mattress; it's in someone else's hands. Check up on it periodically so that your money doesn't become your state's indefinitely. After all, aren't they getting enough of your money each year in taxes?

Do you have a personal experience with escheat laws? Are you keeping a close enough eye on your accounts? Is it fair that states are tapping into the funds of their tax-paying residents? Share your thoughts here.

-- The opinions expressed are solely those of the author and do not necessarily reflect the views of Comcast.

Message Edited by Renee_DeFranco on 11-02-2009 05:56 PM