Inactive Savings Accounts Can Be Turned Over to Your State
Money in your savings account belongs to you. You opened the account, your name is on the account, and you’re the only person who can make withdrawals from the account. However, there is one way that you could lose out on getting your money back from the bank. If you forget about your savings account, the government could take possession of your savings account through a process called escheatment.
The thought of the government repossessing your bank accounts might sound scary, and it is, but escheatment is an important process that helps the government keep the financial system running smoothly. Without a way to remove old accounts from banks’ records, financial institutions would have to track thousands upon thousands of abandoned accounts for no reason.
Each state has different rules surrounding escheatment. It typically takes years of disuse for the government to take ownership of old savings accounts. Understanding what escheatment is and how it works can help you make sure your savings aren’t turned over to the state and can help you find lost money that you didn’t even know you had.
What is Escheatment?
Escheatment is a process where financial institutions turn over ownership of old and forgotten accounts to the state. Escheatment applies to more than just savings accounts. Certificates of Deposit, brokerage accounts, 401(k)s, and even refunds from old cable bills can be escheated to the state.
Financial institutions like banks are responsible for maintaining records of every account and every account holder who has money at the institution. This includes sending regular statements and information about the account. However, if you move and forget to update your contact information with your bank, your bank may not be able to contact you.
Before escheatment occurs, the financial institution has to try to find the owner of the account, but sometimes it just isn’t possible. If the bank tries to contact the owner of the account and cannot, the government will escheat the account.
How Does Escheatment Work?
While the specifics vary from state to state, escheatment is designed to only happen to accounts that have truly been abandoned. In most states, it takes five years of inactivity for the escheatment process to kick in. That means you only have to make a deposit or withdrawal once every five years to make sure you keep your money in your savings accounts.
Most banks will even send you a note if you leave your account alone for a year or two, asking if you’re still aware of the account. If you respond, that resets the timer as well.
If your account remains inactive for too long and the bank can’t get in contact with you, the government considers it to be abandoned and takes possession.
The good news about escheatment is that the government doesn’t take the money and spend it as it pleases. Instead, the government takes the funds off the bank’s books and holds it in its accounts. If the escheated account held securities like stocks or bonds, the government typically sells them and deposits the cash proceeds to its accounts.
How to Avoid Escheatment
Avoiding escheatment is as easy as keeping track of your financial accounts and making sure to update your contact information if you get a new phone number, e-mail address, or move to a new home.
Try to check in on all of your accounts regularly. Log into your online accounts and make sure you’re still getting your regular statements. If you have a 401(k) from an old employer, keep track of it and make sure that you don’t forget about it. You could also roll it into an IRA if you want to make things easier and reduce the number of accounts that you have.
If you receive communications from your banks, don’t ignore them. Respond if your bank reaches out to remind you of inactive accounts. This should reset the timer before escheatment can happen.
Can I Get My Money Back if It’s Escheated?
Escheatment isn’t about the government taking away your money. Part of the process is the government trying to find the rightful owner of the abandoned account.
If you realize that you’ve forgotten about an old account, only to go back to the bank and find out that the account was escheated, you can still get your money back.
How to Find Money That Has Been Escheated
Most states have a way for people to search for lost and abandoned accounts. For example, Massachusetts has an unclaimed property website that anyone can search. All you have to do is enter your name and where you live to find a list of different unclaimed properties. If you lived in more than one place, it’s worth checking the unclaimed property listings for each state or city that you’ve lived in.
You can also try searching the National Association of Unclaimed Property Administrator’s website, which can direct you to your local unclaimed property administrator.
Once you’ve located some unclaimed property that belongs to you, you should file a claim with your state to get it back. Usually, all you have to do is fill out a form, provide some identifying information, such as a scan of your driver’s license, and mail it to your state’s unclaimed property office. It can take a few months, but you should get a check in the mail for the value of the account at the time it was escheated.
Escheatment happens when you forget about old financial accounts, but just because the government escheats your account doesn’t mean that your cash is gone. Keep tabs on your bank accounts, but if you forget about one and find it gone, search through your state unclaimed property site. You should be able to reclaim your money. You might even find some old unclaimed funds that you didn’t know about.