Escheatment. (Legal Jargon).(history and laws)

This may come as a surprise if your customer's dormant accounts are used as a source of revenue--it is likely, and in fact inevitable, that those funds must be remitted to the state or federal government. This procedure is known as "escheatment," which has amassed billions of dollars of unclaimed property to state coffers.

History of Escheatment

The theory of escheatment provides that until the rightful owner is located, all citizens of the state, rather than an individual holder, derive benefits from the unclaimed property. Unclaimed property law finds its genesis in early English common law where unclaimed property would escheat, or revert, to the king upon abandonment. In modern times, a custodial theory has replaced confiscation. In the United States, the laws of the individual states govern abandoned property and escheatment. The meaning of escheatment has broadened to include property of every kind and description that remits to the state for want of individual ownership. Accordingly, the definition of unclaimed property involves hundreds of categories of property. As a rule of thumb, if a person or entity has a legal or equitable right to the property, then a state's unclaimed property law governs it.

The Uniform Laws and Purpose of Escheatment

Congress enacted several uniform laws to control the disposition of unclaimed property among the various states. The most recent legislation is the Uniform Unclaimed Property Act of 1995 (the "1995 Act"). The Uniform Unclaimed Property Act of 1981 and the Uniform Disposition of Unclaimed Property Act of 1954 preceded the 1995 Act. Portions of the uniform laws have been enacted by every state, the District of Columbia and Puerto Rico. The purpose of the unclaimed property laws have remained constant--to reunite owners with their property, limit the liability of the holder of unclaimed property and to provide states with a stream of income.

Reporting Requirements

If property remains unclaimed for a certain period of time, known as the "dormancy period," then a state gains derivative rights to the unclaimed property. The dormancy period is defined by state law and is measured by the date that the holder comes into possession of the unclaimed property and the date that the property must be reported to the state. A majority of states follow the 1995 Act and mandate that any money or credits owed to a customer has a dormancy period of three years. However, the dormancy period may range between one year and five years.