Unclaimed Property? What’s that you say? I have no idea what you’re even talking about!
Don’t you worry, it’s not as scary as it sounds, but it can cause some headaches and have some pretty devastating (and expensive) consequences if not handled correctly. And that’s why we’re here.
So what is Unclaimed Property? Simply put, it’s a dormant or unclaimed financial asset that your business owes to another business or individual. A lot of times these include un-cashed checks, inactive savings accounts, life insurance proceeds, customer overpayments and even unused gift certificates. Easy enough, right?
Now, what do you need to do with these assets? Here’s the short answer: Give them back or turn them over to the state.
Make sense? Well now let’s talk about the longer answer (you knew it was coming):
Why would these things go unclaimed or inactive?
There are a number of reasons. Maybe the owner forgot about them or is deceased. Maybe they are ill and unable to keep up with their finances. The company may no longer be in business, sold, or changed their name. Or maybe they simply don’t know about the asset or it is too small for them to even take the time to claim it.
Fair enough. So let’s say I have some of these assets. What do I do now?
Ah, now we’re getting into the good stuff. Let’s start out with some of the basic terminology you need to know.
- Holder – This is the company in possession of the assets that belong to someone else. This is you.
- Dormancy Period – The amount of time an asset must be outstanding before it has to be reported to the state.
- Escheatment – I know what you’re going to say. You’ve never “escheated” on your taxes in your life. (Bad pun, we know. But come on, it is kind of funny). This one’s actually pretty easy. It’s the act of turning the property over to the state. Once you do this, they now have the responsibility for it. But before that…..
- Due Diligence – This is the act of making one final attempt to locate the property owner.
After you have these down it’s a simple three step process.
- Identify the dormant accounts
- Notify the property owners (due diligence)
- Remit to the property owners or the state (escheatment)
Sounds easy. So why is this so important?
One of the big reasons is to protect consumers. This system is supposed to create a centralized location where businesses can report and remit the property, and the owners can search for and claim these funds.
So I might have some of these funds out there that somebody owes me?
Maybe. Check out www.missingmoney.com. Maybe you have a few bucks left in the checking account you opened up in college.
Earlier you mentioned devastating and potentially expensive consequences for not following these rules.
Alright I’m not trying to scare you, but there can be some pretty bad consequences if you’re not in compliance. And, frankly, states are increasing enforcement efforts. Also, you can be audited in relation to unclaimed property for things like your taxes. Plus, there’s no statute of limitation, meaning the IRS can come knocking at any time.
Think we’re joking? There’s a case currently in litigation where a mere $147.30 of unclaimed property found by an auditor turned into an extrapolated assessment of nearly $2 million!
Ok. So I have to report everything to the state right now?
Not so fast. You don’t have to report everything right now, but you at least need to start thinking about it.
There are a lot of unique questions surrounding unclaimed property:
- What types of property do I have that may be subject to these rules?
- What is the value that should be reported?
- To what State should the property be reported to?
- How do I go about tracking down the property owner?
- Is the account dormant or not?
- How long after the account is dormant do I have to report it?
Different states have different rules for reporting, and there are strict timelines to follow. This is where you may want to get an expert involved. They will help you navigate the process and ease the compliance headaches.