Unclaimed property: Overview, definition, and example
What is unclaimed property?
Unclaimed property refers to assets or belongings that have been abandoned or left unclaimed by their rightful owner for a certain period of time. These can include various types of property such as bank accounts, insurance policies, utility deposits, wages, tax refunds, and tangible personal property. When the owner of the property cannot be located or fails to claim it within a specific time frame, the property may be considered "unclaimed" and often must be reported and transferred to the appropriate government authority or state.
Each jurisdiction has its own laws and regulations regarding what qualifies as unclaimed property and the procedures for handling it. Typically, unclaimed property laws require businesses and institutions to make diligent efforts to locate the owner of the property before reporting it to the state, where it may be held until the rightful owner comes forward to claim it.
Why is unclaimed property important?
Unclaimed property is important because it ensures that assets are not lost or forgotten. When property goes unclaimed for long periods, it can represent significant value. By transferring unclaimed property to the state or other government entity, it provides a system of accountability and protection for the rightful owner.
For businesses and financial institutions, adhering to unclaimed property laws is critical to avoid legal penalties or fines for non-compliance. For individuals, understanding how unclaimed property works can help recover lost assets, such as forgotten bank accounts or insurance policy payouts.
Understanding unclaimed property through an example
Imagine a person, Sarah, who had an old bank account from years ago but forgot about it after moving to a new city. After several years of inactivity, the bank is required by state law to report the account as unclaimed property because the bank cannot contact Sarah or determine her whereabouts. The state now holds the funds in a central unclaimed property repository.
If Sarah later realizes that she forgot about the account, she can contact the state’s unclaimed property office, provide proof of ownership, and claim the funds. Without the unclaimed property laws, Sarah might never have had the chance to recover the funds.
In another example, a utility company may have overpaid a customer for a deposit refund but cannot locate the customer. After a set period, the company must report and transfer the unclaimed deposit funds to the state. The customer, once located, can then file a claim with the state to recover the deposit.
An example of an unclaimed property clause
Here’s how an unclaimed property clause might appear in a contract or agreement:
"The Parties agree that any funds or property that are left unclaimed for a period of [insert time frame], and that cannot be distributed to the rightful owner, will be considered unclaimed property and transferred to the appropriate state or regulatory authority in accordance with applicable unclaimed property laws. The Company will make reasonable efforts to notify the rightful owner before such transfer."
Conclusion
Unclaimed property laws provide a system to protect individuals’ assets by ensuring that property left unclaimed is transferred to a central authority, usually the state, where it can be held and later returned to the rightful owner. These laws help prevent financial loss for owners of unclaimed property, while ensuring that businesses comply with reporting and transfer requirements. Whether it’s forgotten bank accounts, utility deposits, or life insurance payouts, understanding how unclaimed property works can help individuals recover lost assets and protect their financial interests.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.