Understanding Escheatment: The Transfer of Unclaimed Property to State Authorities

2 min read | January 22, 2025 11:59 PM PST | By Team Kalkine Media

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Highlights:

Escheatment refers to the process of transferring unclaimed property to the state.

Mutual funds are required to surrender uncashed checks or client shares if the owner is unreachable.

Each state sets its own time frame for the escheatment process.

Escheatment is a legal process in which unclaimed or abandoned property is transferred to the state. This occurs when the rightful owner of the property cannot be located or does not take any action to claim it within a specified period. This period is determined by state laws, and each state may have different timeframes for escheatment.

The property in question can include a variety of assets, such as uncashed checks, dormant bank accounts, or client account funds, including mutual fund shares. If the owner of these assets cannot be found or has not taken any steps to claim the property within the prescribed time, it is turned over to the state’s unclaimed property office.

For mutual funds, this process involves turning over uncashed checks, as well as client shares that are in accounts with no activity for a certain period. Mutual funds must track the status of their investors’ accounts and make sure to comply with the state's laws. If the investor remains unresponsive, the assets are handed over to the state.

The escheatment process serves to protect the interests of both the property owner and the state. For the property owner, it ensures that assets are safeguarded and returned if claimed later. For the state, it provides a way to manage and protect unclaimed property, often using it to fund state programs or services.

Conclusion: Escheatment laws ensure that unclaimed or abandoned property is properly handled by the state when the rightful owner cannot be found. By regulating the transfer of assets, these laws aim to protect individuals' rights while maintaining the integrity of state property management systems.

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