Every year as much as $77 billion is held by states in the form of unclaimed property. Ultimately, only about $3 billion of these unclaimed funds get retrieved according to the National Association of Unclaimed Property Administrators. Usually, these assets become unclaimed when contact with the rightful owner is lost over time. This can be attributed to dormant accounts, unreported changes of address, incomplete or damaged records, name changes, and more.

It is important as a business owner to know what to do when you’re unable to reach an owner or former employee regarding their unclaimed property. Otherwise, you assume the risk of being in noncompliance with state laws and the possibility of being audited and assessed steep fines. Remember, unclaimed property is not the property of your business.

What is unclaimed property?

Unclaimed property or unclaimed money is defined as monetary or physical assets which have remained separated from their rightful owners over time. It’s important to note that unclaimed property is regulated at the state level and each state has its own set of laws that govern how uncollected property should be handled. All states have escheat laws which specify a period of no contact regarding the property before it becomes unclaimed. The regulations are those of the state where the property owner or payee resides, not the state where your business is located.

Property includes both tangible and intangible assets.

Tangible personal property:

• Contents of safety deposit boxes
• Physical assets (vehicles, furniture, household goods)
• Estates

Intangible personal property:

• Checks, saving, and other types of bank accounts
• Stocks, mutual funds, bonds, dividends
• Uncashed payroll or payment checks
• Gift Cards
• Certificates of deposit
• Matured or terminated insurance policies
• Customer overpayments/refunds
• Trust distributions
• Mineral royalty payments
• Annuities

How should I handle unclaimed property?

Businesses must make every reasonable effort to find the property owner. States require that a business attempt to contact owners and mail due diligence letters to their last known address. Letters should be sent by certified mail or “return receipt requested.”

If you ultimately can’t find the recipient within a reasonable time, you must report and turn over the unclaimed property to your state, so it becomes available to the recipient if the owner later comes forward. For intangible property, you must submit a report to the state treasurer and pay the amounts due to owners who you were not able to contact. Your business should reflect the liability on its balance sheet.

Note that most states provide separate mechanic’s lien and storage lien procedures for disposal of abandoned vehicles by licensed automotive shops and storage facilities. For more information on abandoned vehicles visit here.

Key things to consider:

• Research current state laws regarding unclaimed property in the states your company is involved in. Pay attention to uncollected property reporting procedures to the state.
• Be proactive in capturing information on uncollected property and keeping a timeline for contacting unclaimed property owners.
• Allocate time for reporting and paying for uncollected property.

State Audits

It’s important to remember that uncollected property is not the property of your company. States can and will audit uncollected property and can assess fines and penalties for non-compliance with state laws.

More general information on unclaimed property can be found here. For additional information, businesses are encouraged to check with an accountant in the state where the business operates. You can also contact the NFIB Small Business Legal Center at info@nfib.org for more general information.