California’s Escheatment Process for Unclaimed Property

Here is a shocking number: there is over $49 billion in the unclaimed property sitting around in the United States today. This number includes everything from unclaimed refunds and last paychecks to entire homes, investment properties, and abandoned parcels. What happens to all of that property? And how did it get there in the first place? The answer lies in the escheatment process, or the process by which abandoned or unclaimed property is transferred to the state.

Everything of value has a “dormancy period” on it of some kind, which kicks into effect when there has been no activity on that property for some time. The exact timing depends on the asset or property in question and the state in question.

In California, for example, outstanding wages that have not been claimed because the employee in question disappeared or moved out of state with the wrong forwarding address, but has not died, are turned over to the state after a dormancy period of one year. In contrast, any money order not issued by a bank, such as a money order provided by a vendor or the government, is turned over to the state after seven years.

What is the Escheatment Process?

The dormancy period describes the amount of time that must pass without human activity before a property or asset is escheated. The escheatment process is when property passes into the management of the respective state – in the case of California, unclaimed property is the purview of the Controller of the State.

When a property is escheated, it is claimed by state governments. It is not owned by the government. Do not confuse this for a tax levy, for example, where state tax authorities or the federal government (through the IRS) claim and liquidate property from taxpayers with tax debt to pay their debt. In a levy, the government claims, sells, and uses the quick sale value of a property to cover a tax liability. When a property is escheated, it falls under the control of the government, but it remains unclaimed.

What Happens to Unclaimed Property Over Time?

Property held by the state remains unclaimed until someone with a legal claim to it can take it. This is the main reason the United States has billions of dollars in unclaimed property – state governments cannot do anything with this property except hold onto it until a rightful owner appears.

A lot of unclaimed property is relatively innocuous, such as unclaimed security deposits and final paychecks. It is rare for a person to die and own a home they could not leave behind for anyone else, but it does happen. According to the National Association of Unclaimed Property Administrators, the unclaimed property most commonly includes:

• Checking or savings accounts
• Stocks
• Uncashed dividends
• Payroll checks
• Trust distributions
• Money orders
• Certificates of deposit
• Security deposits
• Royalty payments
• Safe deposit boxes
• Insurance payments
• Annuities
• Overpayments
• Back wages
• Pensions
• Life insurance proceeds
• Federal tax refunds (these expire in three years)

Anyone living in the United States can check if they have any unclaimed property to their name through unclaimed.org and their respective state’s databank, such as the California Unclaimed Property Database. From there, the process for claiming unclaimed property differs depending on the circumstances of the property and the type of property.

For example, if it was a security deposit on an apartment you used to rent, then providing proof of ID and a copy of your tenancy agreement or rent agreement from that time would often be enough to claim that unclaimed security deposit.

What if the Original Owner Is Deceased?

Things can get far more complicated when the original owner of an unclaimed property is deceased. The burden of proof to prove that you are the next of kin in the absence of any other estate plan (dying intestate) is very high. It can take the state a considerable amount of time to process that information before they can deny or confirm it. Nevertheless, it may be worth doing anyway when the reward to be gained is considerable, such as the contents of a safety deposit box, a life insurance claim, or even a tangible piece of real estate.

Not all lost or abandoned property can be escheated by the state. There are notable, albeit exceedingly rare, exceptions. For example, if an amount of hard cash is lost for a certain amount of time, it can become the property of whoever finds it first: this is known as Finder’s law. Finders must make a reasonable attempt to return the private property to the rightful owner and have a right to be reimbursed for their efforts in doing so. If the property is abandoned, however, then they may keep it. But this is where things can get tricky.

The rule depends on the type of asset or property in question and where it was found. A jewel lost for decades, then found by a chimney sweeper after several families had moved in and out of the house, could theoretically be kept by the chimney sweeper. However, if you find a person’s suitcase of cash, you must make every effort you can to return it to them or to the proper authorities, who can then turn it over to the state to be claimed by the rightful owner.

Depending on the object and circumstances of the case, the line between finder and thief can be very thin. It often takes the expertise of a property lawyer to tell the case-by-case difference, so if you find something valuable, talk to a lawyer as soon as possible to determine your best course of action.

Is There a Time Limit Before the Escheatment Process?

There is no limit on unclaimed property. Something abandoned in the 1980s is still up for grabs by anyone eligible as the rightful owner. The trouble is that it becomes harder and harder to prove that any one person is the rightful owner as time passes because the burden of proof becomes steeper.

Where Can I Find My Unclaimed Property?

Unclaimed property in California is reported to the California State Controller’s Office during the escheatment process.

The State Controller’s Office holds an online database of all unclaimed monies and properties. It holds several events throughout the state, drawing awareness to the state’s unclaimed property database and encouraging taxpayers to come forward and find out if they have any property they might be eligible for.