Did you know that your unknown, or “left alone,” investments may be in danger of tax consequences? States have some rights (and brokers the obligation) to esc
True or false: Your out-of-sight, out-of-mind investments can grow uninterrupted without consequences?
False. Beware of escheatment. Say what? Perhaps you purchased securities a few years back looking for capital appreciation or distribution income. You may review your statements regularly to see how well you’re doing, but other than that, you’ve just kicked back and put your feet up. Warning—states have the right (and brokers the obligation) to escheat your property based on certain criteria. Escheatment simply means assets that have apparently been abandoned are eventually handed over to the state if the owner cannot be contacted.
The escheatment rules vary from state to state, but generally apply to one (or a combination) of the following scenarios:
Escheatment is applicable to your bank accounts, CDs, and much more. Special rules apply to Individual Retirement Accounts (IRAs). Depending on the type of IRA, it may be able to lie dormant until required minimum distributions (those payments that kick in at age 70 1/2) are mandatory, but it’s important to make sure.
You may have checks that you never cashed, which after a certain time frame are handed over to the state. Firms are required to notify you in advance if your property is headed for escheatment; you may be given 60 days or longer in order to contact the firm. But those notifications are sent through the mail, so if the address on your account is not current, the firm might be unable to contact you.
This depends on the state and what was escheated. Checks, for instance, are cashed and held. If securities are escheated, the state may try to hold them for a limited period of time before liquidating them for cash. That means income that would have been earned on your investments is forfeited.
Your best bet? Check in with the financial firms you use (or have used) on a regular basis. You may want to do this annually to make it a habit. Pick a day you’ll remember: your birthday, the day you file your taxes—anything you do on an annual basis will work just fine.
There are several sites that will assist you in finding (and claiming!) your abandoned property. The National Association of Unclaimed Property Administrators (NAUPA) has great information and resources. Check every state you have lived in, just to be on the safe side. If your last name has changed, be sure to check your former name as well.
I personally did this while writing this article and found out that I had a $41 check from a hospital and $17 from a 15-year-old savings account that I thought I had drained and closed. The old savings account was under my maiden name. Granted, it’s not an unclaimed life insurance check from an uncle I never knew, but it’s a movie ticket for two!
There are typically no fees involved with claiming what is rightfully yours; it may just take a bit of time.
Clients can enter their tax questions using the Ask Ted button along the top navigation bar. Or, use our Chat feature to speak with a Tax Services Representative.
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