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Account Inactivity Can Cost You Money

August 26, 2008

Posted by Roshawn Watson under Uncategorized

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By: Roshawn Watson

According to the National Association of Unclaimed Property Administrators, $4.7 billion in “abandoned” assets were confiscated by states in the 2006 fiscal year. These properties were seized from 117 million people, and there is a good chance that some of it is yours.

Why Did States Get Our Money
Most states have provisions that if you do not initiate a transaction or communicate with the financial institution about it, the dormant account can be turned over to the state after 3 years of inactivity.

Who’s At Risk
Anyone who sets aside money for long-term expenses, such as retirement, college, emergencies, car replacements, etc. is at risk. By the time you get around to using those funds, they could be gone.

Perversion of a System Designed To Help Account Holders
Ironically, these abandoned property laws were enacted to protect consumers: to keep banks from eating up dormant accounts through annual account fees. However, in recent years, these accounts have become such a cash cow for states because states generally do not pay interest on the abandoned property and can use the money to fill budget holes.

States are supposed to make an earnest attempt to contact property owners; however, over the last two years, more than half a dozen states have shortened the time required before funds must be turned over. Additionally, few states actively monitor whether companies notify account holders.

Are the Assets Gone Forever
Seized money can be returned, but it is difficult. First, one must find the asset, then fill out a lot of paperwork. Overall, the process can take months. Additionally, not all property is retrievable. For example, assets such as jewelry and stocks that are seized from safe deposit boxes and brokerage are usually sold shortly after being confiscated by the state, meaning that you could lose out on future appreciation and that sentimental piece of jewelry.

Since many property owners never find out about their seized property, you can check out an online database to see if you or your family have abandoned property.

How To Avoid Losing Your Assets Keep your accounts active. Sign into accounts online at least once a year at a minimum. It would be better to deposit or withdraw money. Similarly, if you have a safe deposit box, visit it annually as well.

States and financial institutions should make greater efforts to contact account holders of seized assets rather than cite budgetary constraints as being prohibitive. Interestingly, when California lost a decade-long legal battle over the way it treats abandoned property, it began to make a substantial effort to contact property owners and allow more time before property is seized.

Take Home
Ultimately, it is crucial to keep your accounts active: that way you do not lose your assets in the first place.

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