For Delawareans, there is no island of misfit money for where all the forgotten savings accounts, unspent gift cards and contents of abandoned safety deposit boxes go.
Those items end up in the hands of the Division of Revenue through a process called escheatment -- when the state takes ownership of unclaimed property.
Delaware collected more than $370 million of unclaimed property last fiscal year, making it the state’s third largest source of income, but few people even know their money could be in danger, said Val Golin, spokeswoman for ING DIRECT.
Bank accounts in Delaware are considered abandoned after five years without a transaction, she said, and a bill signed into law June 30 makes investment accounts dormant after three years.
The state also takes control of uncashed checks and abandoned stocks, bonds, insurance proceeds, utility refunds and gambling winnings.
Financial institutions must hand dormant accounts to the state every fall and spring, Golin said, and ING DIRECT has had to turn over 15,000 abandoned accounts worth $4 million.
Banks will do everything they can to track down owners, but escheatment may be inevitable if a customer has not kept their records up to date, she said.
Escheated money is deposited into the state’s general fund, but property owners are always able to request the return of their money, said Patrick Carter, director of the Division of Revenue.
The state typically pays between $8 million and $11 million each year to people reclaiming property, he said. The largest repayment ever was more than $10 million.
To reclaim property, people must write a letter to the state and prove they are the owner, Carter said. The division receives about 2,000 letters a year.
“If you can prove you are the heir, even if we have been sitting on it for 90 years, you will get the money,” he said.
But the process can be time consuming, Golin said, and people who lose rainy day savings accounts to escheatment could be in trouble if that rainy day comes without warning.
People who lose stocks to escheatment can reclaim the value of the security, Golin said, but risk losing out on capital gains because the state sells escheated property immediately.
Similar problems arise when the contents of safety deposit boxes are escheated, Golin said.
“If you have a family heirloom in there, the state might sell it for a tenth of its price and the sentimental value goes out the door as well,” she said.
Minors are especially vulnerable, Golin said, because many parents open savings accounts for their children, but do not touch the accounts until it is time to pay for college.
While escheatment may be unwelcome for some, the process is necessary to prevent property from going to waste, said Leslie Johnson, a professor of property, wills and trusts at Widener University School of Law.
Escheatment laws date back hundreds of years and are especially important when people die without a will and the law must determine who owns their property, she said.
Writing a will and notifying heirs is crucial because escheat very rarely occurs if a property owner has been proactive, said Johnson. Escheat provides one more reason for people to pay attention to their investments and accounts, she said.
ING DIRECT provides the following list of tips to avoid escheatment:
- Login to online accounts at least once a year
- Make a balance inquiry, a small deposit or withdrawal on all bank accounts once a year
- Cash or deposit checks when you get them
- Use gift cards, traveler’s checks and gift certificates promptly
- Visit safe deposit boxes at least once a year
- Notify any financial institution of a new name or address change
