What is Escheatment?
Escheatment is the term used for the process of reporting and turning over all forms of unclaimed or abandoned property to state authority. Account assets are deemed to be unclaimed/abandoned when there have been no owner-generated activities for a state-specified timeframe of usually 3-5 years, and the account holder cannot be contacted. Regulations regarding escheatment of unclaimed property vary from state to state; you can check out the National Association of Unclaimed Property Administrator’s(NAUPA) website for links to each state’s rules for abandoned property.
What is considered owner-generated activities?
Owner-generated activities include purchase or sale of securities, deposit or withdrawal of funds or securities, transfer of funds or securities, contact information updates, return of signed Unclaimed Property Letter, web inquiries, phone inquiries, email correspondence. Please note that dividend distributions, dividend reinvestments, and corporate action position adjustments are not considered owner-generated activities.
How can you prevent escheatment of your investment account?
Active engagement with your account is the best way to prevent the account from being deemed abandoned. For example, logging into your account periodically, execute trades, or deposit/withdraw money from your account from time to time. It is also very important to keep your contact information (phone number, email address, and physical address) updated to help ensure you receive any notices related to your account. If your financial institution sends you mail that is returned as undeliverable, or it cannot reach you through your other contact information, your account may be declared abandoned and end up in escheatment.
Are IRA accounts subject to escheatment?
Applicable laws require assets in traditional IRA accounts to become escheatable if there is inactivity for the time period starting from when the account owner needs to take out required minimum distributions (age 72 or 70.5 if born before July 1, 1949).
Roth IRA accounts are not subject to the same regulation. If a distribution does not occur within five years of the Roth account holder’s death, the account is then subject to escheatment.
Is there any fee associated with escheatment?
If an account is in escheatment due to the absence of a response or applicable account activity, our clearing firm charges a Dormant Processing Fee of $100.00 for every account escheatable to its applicable state. This fee covers the costs to disburse the account assets to the state.
If your investment account is escheated, what can you do?
You must file a claim with the state that escheated your investment account to attempt to recover account assets. The rules for filing escheatment claims vary for each state, but you should be prepared to provide information that verifies your ownership of the investment account. Some states also have a time limit for making escheatment claims. Contact your state’s unclaimed property authority or an attorney for further advice on how to proceed with an escheatment claim. You can find contact information for each state’s unclaimed property authority on NAUPA’s website. If you have an international account with Firstrade, you may claim your escheated assets via the State of New York.
It may take up to 6 months for the escheated account to arrive in the book of State’s “Unclaimed Property”. If you cannot locate your account in the first search, check the account statement (or contact your brokerage firm) to confirm the date of escheatment. You may need to check on a later date to locate your account.