Under the law of escheat, personal and real property that is deemed abandoned is transferred to the custody of the state. Unclaimed safe deposit box contents, stock certificates and other property are then held by the state while it seeks to identify the owner. Escheat laws have been the source of controversey recently, as states have become more aggressive in asserting their rights, and some have been accused of being lax about returning property to its owners.
History of Escheat Law
The doctrine of escheat is based on English common law. The Crown was the ultimate holder of all real estate. When no heir existed for the passing of tenant property, the property reverted to the land's lord, and if no lord existed, to the Crown. This device allowed for the reconveyance of land. As the feudal tenure system eroded, escheat became the Crown's right.
Another English concept underlies the modern unclaimed property laws: bona vacantia. This is a Latin term meaning "vacant property," and it applies to personal property. The Crown claimed title to such property based upon the fact that there was no other owner, rather than upon the idea that the Crown was the ultimate owner. These two concepts, escheat and bona vacantia, have merged to form modern U.S. unclaimed property and escheat laws.
Modern U.S. Unclaimed Property Laws
The fifty states and the District of Columbia have escheat laws that govern unclaimed property, and several U.S. Supreme Court decisions have constitutionally validated their use. State laws are now custodial in nature. When a person abandons intangible property, such as uncashed checks, stocks, payroll checks, and gift cards, the state retains the property indefinitely until the true owner is located. The state does not have title to the funds or property, but may use the cash and property for the benefit of the state's citizens until a claim is made. Cash is held in a cash fund and non-cash items are held for a specific period of time and then sold.
Finding Unclaimed Property
States maintain lists of the unclaimed property in their custody. Typically, individuals can access the list on the state's Web site and download a claim form. The claimant must prove his identity and his right to the property before the state will release it.
When is a Business Required to Report and Release Unclaimed Property?
When a business has unclaimed property, it must report the property to the state. However, the business usually must attempt to locate the owner before doing so.
Gift Cards and Certificates
Some states have exempted gift cards from the unclaimed property statutes. If the business maintains the name and address of the gift card/certificate purchaser, the state in which the address is located has the first right to the balance. If no exemption exists, some states allow the gift card/certificate issuer to impose charges after a period of non-use.
Intestacy and Escheat
The property of a person who dies and leaves no heirs or will is subject to escheat. Intestacy means that a person did not leave a will. The state's intestacy laws then apply to determine which relatives inherit. If there are no relatives to inherit, the entire estate escheats to the state.
Questions & Answers: Lost/Abandoned/Unclaimed personal property