A Comprehensive Guide to Unclaimed Property: Definition, Process, and Best Practices for Compliance

You’re a financial institution, and you’ll inevitably run into the problem of unclaimed property.

Wait… is unclaimed property a problem? In many ways, yes. 

Under escheatment laws, you’re required to track, monitor, report, and turn over unclaimed assets after a specific period of time while performing due diligence to ensure you give the owner every opportunity to claim their property.

In this guide, we’ll explore what unclaimed property is, common reasons property becomes unclaimed, the steps involved in the escheatment process, and best practices specifically for banks and financial institutions. 

What is “Unclaimed Property”?

Unclaimed property is any financial assets or accounts that have remained inactive or untouched for a specific period of time—the “dormancy” period. These assets can range from customer refunds and escrow balances to uncashed checks or inactive bank accounts.

It isn’t the case that something like a bank account goes unclaimed because the owner hasn’t made a deposit in a while. This isn’t a question of a lost and found… instead, it’s an understanding that, once assets are deemed unclaimed, they are turned over to your local jurisdiction so they can liquidate and use those assets.

Examples of unclaimed property relevant to financial institutions include:

• Checking accounts
• Savings accounts
• Retirement accounts
• Dividends
• Life insurance policies
• Safe deposit box contents
• Uncashed payroll checks
• Unused customer refunds
• Escrow refunds
• Uncashed cashier's checks or money orders
• Certificates of deposit (CDs)
• Loan overpayments or deposits

So, with that in mind, unclaimed property is considered “unclaimed” because the owner has showed no interest in claiming it, and all attempts on your part to reach them have failed. It’s like finding $20 on the ground and holding on to it – you ask around to see if you can find the owner, you wait a few days or weeks to see if someone comes in to claim it, and if they don’t, you can turn it over to authorities.

Every property type has a designated dormancy period, which varies by state, making it vital to monitor these accounts closely to ensure comprehensive compliance.

Common Reasons Property Becomes Unclaimed

The reality is that these types of property go unclaimed every single day. Here are some of the most common reasons:

• Death of the owner: If a customer passes away without clear instructions or next-of-kin notification, accounts and refunds may remain unclaimed.
• Forgetting about the property: People always forget deposit boxes or small checks, and it doesn’t benefit anyone to have that property simply sitting and collecting dust.
• Change of address: Customers who move and fail to update their address information often leave bank account statements, refund checks, or notifications undelivered, leading to unclaimed assets.
• Failure to cash checks: Escrow refunds, customer rebates, and refund checks that are never cashed go stale and frequently turn into unclaimed property. Without proper follow-up, these balances can easily become dormant and wasted until claimed by the government.
• Change in customer relationship: When customers stop using certain accounts without officially closing them, these accounts may sit inactive for years, eventually becoming unclaimed property. 

How the Unclaimed Property Process Works

The unclaimed property process ensures that financial institutions do their due diligence in trying to contact the rightful owners before escheating (transferring) the property to the state.

• Dormancy: “Dormancy” is a period of time in which the asset is left unclaimed by the owner and your business makes every reasonable attempt to contact them. Once the dormancy period has passed without activity, the asset is classified as abandoned and is “escheated” to the relevant jurisdiction.
• Reporting: After the dormancy period, if there is no response from the property owner, the bank must report the unclaimed property to the state. During this time, your organization must file the right records and reports to show that every effort has been made to contact the owner.
• ‍Escheatment: Once reported, the unclaimed property is transferred to the state's unclaimed property office. The state will hold the funds indefinitely until the rightful owner or their heirs claim them.
• ‍Ongoing Reporting: The state keeps detailed records of all unclaimed property transferred to them, allowing individuals to search for and claim their assets. Many states have online databases where individuals can search for unclaimed property by name.

What Are Best Practices for Handling Unclaimed Property?

If you’re running a financial business, you will most likely handle the requirements for managing unclaimed property. You’ll need to implement thoughtful processes to ensure unclaimed property compliance. Here are some best practices:

Regularly Audit Accounts

Ensure that inactive and dormant accounts are regularly audited to catch unclaimed property early. Periodic reviews allow banks to notify customers sooner and prevent issues with escheatment deadlines.

Use Automated Software to Track Dormancy Periods

Automated systems can help track when accounts or balances are approaching their dormancy period. Using software to monitor these accounts helps ensure nothing slips through the cracks, reducing the chances of property becoming unclaimed.

Maintain Accurate Contact Information

Regularly updating customer information is crucial to preventing unclaimed property. Banks should encourage customers to update their contact details and have processes to handle returned mail or failed communications.

Plan for Internal Compliance Reviews

Conducting regular internal compliance reviews helps ensure that your institution’s unclaimed property processes are up to date and in full alignment with state regulations. Internal checks can also highlight areas that need improvement.

Stay Compliant and Streamline Account Offboarding with Eisen

Managing unclaimed property isn’t easy, but it isn’t so challenging you can’t streamline it into your business operations. Eisen offers a comprehensive solution that automates escheatment and makes compliance effortless. With Eisen, banks can avoid penalties, improve customer service, and streamline their internal workflows for handling unclaimed property.

Forecast Your Escheatment Liability

Eisen clearly forecasts your escheatment liabilities in each state, helping you manage potential financial obligations and regulatory risks.

Track the Status of Every Active, Inactive, and Dormant Account

With Eisen’s real-time tracking tools, you can monitor all accounts—active, inactive, and dormant—ensuring that you have full visibility into the lifecycle of every account.

Never Miss a Deadline Again

Our automated system helps you stay on top of all reporting and transfer deadlines, so you’ll never have to worry about missing an important escheatment deadline again.

Common FAQs

What are the reporting requirements for unclaimed property, and how often must we submit reports?

Most states require financial institutions to submit an annual unclaimed property report. These reports must include the property owners' names, their last known contact information, the type of property, and the value. Each state has specific deadlines, so checking local requirements is essential.

How can we audit our unclaimed property process to ensure full compliance?

Performing internal audits of your unclaimed property process is essential for compliance. Automated tools like Eisen’s escheatment solution can simplify this by flagging potential issues before they lead to fines or penalties.

What are the penalties for failing to report or transfer unclaimed property on time?

Noncompliance penalties can range from fines to interest charges on the unreported property. In severe cases, legal actions can be taken against financial institutions. To avoid this, ensure that your process is in full compliance with state regulations.