Navigating the Escheatment Process for Outstanding Checks: A Guide for Financial Institutions

Unclaimed property is a significant responsibility for financial institutions, and a big part of that for banks includes managing outstanding checks. It might be strange to think of checks just laying around uncashed, but there are a surprisingly large number of instances where assets like vendor or payroll checks go stale-dated and just lay dormant. 

This guide simplifies the escheatment process to understand checks with clear, actionable steps to help you manage this task efficiently and effectively.

A Walkthrough of the Escheatment Process for Outstanding Checks

Unclaimed checks fall under the “escheatment process,” where you identify, report, and remit unclaimed property if it lies dormant for too long. 

Checks fall into this category when they remain stale-dated for years. Understanding each step is essential for compliance and operational efficiency. 

Below, we outline the crucial stages of managing outstanding checks through escheatment.

1. Identify Outstanding Checks

The first step is to identify all checks issued accurately but remain uncashed or unclaimed. A check can remain uncashed because of a few factors, most commonly because a check is issued and is then returned because the payee has moved, passed away, or didn't claim the funds in a bankruptcy case. 

Identification involves regular reconciliation of bank statements and accounts payable ledgers to pinpoint any outstanding payments.

2. Understand State-Specific Dormancy Periods

Dormancy periods—the length of time a check remains uncashed before it's considered abandoned—vary by state, typically from one to five years. Familiarizing yourself with each state's specific regulations where you operate is crucial.

For detailed information on state-specific dormancy periods, refer to our comprehensive Escheatment Laws by State guide.

3. Perform Due Diligence

You have to make a good-faith effort to contact the property owner to ensure they can claim it. In cases of checks, this is somewhat difficult because if the check is unclaimed, it is most likely due to already-existing difficulties in contacting the individual at their address on file. This typically includes sending written notices to the payee's last known address within a specified time frame prior to escheatment.

These communications should inform the payee of the unclaimed funds and provide instructions on how to claim them. 

4. Prepare Escheatment Reports

All due diligence must be completed prior to reporting. At this point, you'll prepare reports for each state where unclaimed property exists. These reports must include detailed information about the outstanding checks and the steps taken to contact the owners.

Ensure accuracy and completeness in your reports to avoid penalties and state objections.

5. Remit Unclaimed Funds to the State

So, you've made all necessary attempts to reach the payee, completed due diligence, and filed reports. Now, you remit unclaimed funds to the appropriate state agency based on local deadlines. Timely remittance fulfills your legal obligations and helps maintain a positive relationship with regulatory authorities.

6. Update Accounting Records

After remitting funds, update your accounting records to reflect the escheatment. Adjust ledger entries and clear the outstanding checks from your open liabilities.

Ease the Burden of Escheatment with Automation

Escheatment is complex, ongoing, and necessary. Don't think that you can manually manage this process. Rely instead on automation that can help you streamline check identification, trigger correspondence, and compile reports.  

Automation saves time and allows your team to focus on delivering exceptional service to your clients.

Streamline the Escheatment Process for Outstanding Checks with Eisen

At Eisen, we are committed to simplifying the escheatment process for financial institutions. Our Escheatment Hub automates key aspects of managing outstanding checks, ensuring effortless and reliable compliance. Here are some of the features that make Eisen an invaluable partner in your compliance efforts.

Forecast Your Escheatment Liability Due to Each State

Eisen's platform offers real-time insights into your escheatment liabilities across all states. You can effectively manage your financial planning and resource allocation by forecasting the funds due. Our system automatically updates with the latest state regulations, ensuring you have the most current information at your fingertips. This proactive approach helps you stay ahead of deadlines and avoid unexpected liabilities.

Track the Status of Every Outstanding and Stale Check

Gain comprehensive visibility into all your accounts with Eisen's intuitive dashboard. Monitor the status of all your checks effortlessly with our Stale Check Manager. By consolidating all the information in one place, you can quickly identify outstanding checks that require attention and take prompt action, mitigating compliance risks.

Never Miss a Deadline Again

Deadlines are critical in the escheatment process; missing them can result in costly penalties. Eisen's automated alerts and reminders keep you informed of upcoming due dates specific to each state's requirements. Our system schedules tasks and notifications so you can focus on other priorities with the confidence that no deadline will be overlooked.

Experience firsthand how Eisen can transform your escheatment process. Request a demo today and take the first step towards effortless compliance.