Escheat definition
/What is Escheat?
Escheat is a government’s right to take ownership of unclaimed property. This right is exercised when assets have been unclaimed for a specified period of time or when a person dies without heirs. Specific escheat rules are set at the state level, where escheat rights may be granted for just certain types of assets, such as real estate, securities, and dormant bank deposits. Banks and brokerages track account usage levels, and if an account has been dormant for a certain amount of time, they are required to forward the related cash and securities to the state government. However, the escheat laws may require these entities to first make an attempt to locate the account holders before sending assets to the government.
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Tracking Unclaimed Assets
Typically, it is possible to reclaim property that was initially taken by the government, usually by discovering the existence of these assets through a government database and then filing a claim form. These databases are maintained online by the various state governments. In practice, few people are aware of these databases, so the funds end up permanently in the hands of the applicable state government.
Impact of the Statute of Limitations
The statute of limitations can significantly impact the government's right to claim unclaimed property through escheat. Generally, a statute of limitations sets a time limit within which the rightful owner must assert a claim to recover their property. However, in the context of escheat laws, many jurisdictions exempt the government’s right to take unclaimed property from these time limits.
This means that even if the statute of limitations has expired for the original owner to reclaim the property, the government may still proceed with escheatment. This exemption ensures that unclaimed property eventually returns to public use rather than remaining indefinitely in limbo. However, if a statute of limitations does apply, it could restrict the government's ability to escheat property after a certain period, potentially leaving the property in the hands of the holder permanently.