06/ 23/ 2005
by Glenn Townes
The issue of unclaimed property and what to do with it if you are a small-business owner can be troubling. In some states, unclaimed property is defined as any tangible asset that is held, issued or owned in the ordinary course of a holder's business that has remained unclaimed by the owner for a specified period of time – or after it became payable or distributable. The amount of time property remains unclaimed or abandoned varies from state to state, but generally ranges between three and seven years.
Until only a few years ago, entrepreneurs gave little thought to what to do with assets that were abandoned or ultimately forgotten by their owner. Many business owners were simply unaware that unclaimed property laws even existed. While some states, such as New York and Arizona, for example, have unclaimed statutes stretching back to the 1940s and '50s, other state only recently adopted legislation specifically for unclaimed property.
The issue of unclaimed property came to the forefront in 1999 with the highly public prosecution of senior executives at Banker's Trust. The bank was prosecuted when state auditors found flagrant and widespread abuse of unclaimed property by the bank. Banker's Trust falsified documents and lied about what unclaimed property it had in its possession. In some instances, the bank shifted figures in order to make it appear as if the unclaimed property funds were profits instead of liabilities, which is a violation of general state unclaimed property laws.
The most common examples of unclaimed assets include:
- Insurance policy claims
- Escrow balances
- Unreturned and unused security deposits
- Cashier's checks and money orders
- Un-cashed dividends
- Dormant savings and checking accounts
- Matured certificates of deposit
- Outstanding payroll or vendor checks
Assets become unclaimed property for a multitude of reasons. For example, businesses lose track of owners, owners forget about the assets or the owner dies and the family is unaware of the property. In some cases, the property becomes unclaimed because of a custodial relationship was established when the owner was a child. Parents often establish accounts in the name of minors and forget about them.
Finally, experts contend that businesses are not conforming to accounting functions and procedures when it comes to accurately reporting unclaimed property to state officials. By ignoring state guidelines and laws, business owners run the risk of being audited and ultimately fined for not adhering to regulations and accurately reporting unclaimed property.
