Avoiding and Recovering Unclaimed Investment Assets

Some investors have a “set it and forget it” view, intending to let their investments grow until they need to access the money. But if you leave assets untouched and have no contact with the financial institutions holding your accounts for too long, they might be labeled as “dormant,” in which case they must be turned over to the state as abandoned or unclaimed property. While there are mechanisms in place to help you recover these assets, there are also preemptive steps you can take to help you avoid this situation.

Understanding Dormant Accounts

Dormant accounts are those that haven’t seen any activity, such as deposits or withdrawals, for an extended period. Receiving automated interest deposits generally doesn’t prevent an account from being considered dormant or abandoned. An account might also be considered dormant if the custodian can’t establish communications with the owner.

Dormancy periods vary by state and type of asset. You can find the dormancy periods for different assets in each state by browsing the National Association of Unclaimed Property Administrators reporting information.

Unclaimed property can include securities such as stocks, mutual funds and bonds, as well as brokerage, pension fund and bank accounts. It can also include life insurance policies, annuities and certificates of deposit (CDs), among other assets.

You might lose track of your assets if you ignore correspondence from your financial institution or 401(k) plan administrator, or if you don't notify these firms regarding changes to your contact information. The dormancy "clock" might start ticking if mail from your financial institution is returned as undeliverable.

In limited circumstances, such as if a firm is going out of business, your account might be moved to another firm in a “bulk transfer” unless you respond to the notification and provide alternate instructions.

What Happens to Unclaimed Assets

If your financial institution can’t get in touch with you within your state’s dormancy period, it might be required to turn the assets held in your account over to the state, a process known as escheatment. Before beginning this process, your firm must attempt to contact you using your last known contact information and may use any other known contact information for you to reestablish contact. They might also mail reminders or issue notices in publications to locate the owners of the assets.

Each state has different unclaimed property laws that require financial institutions and other organizations to report and remit lost or abandoned property to the appropriate state authority. Depending on its laws, a state may sell escheated assets and provide the cash equivalent to the value of the account if reclaimed by the former account holder or their heirs. Consult a legal or financial professional for more information.

How to Locate Your Property

States maintain lists of reported unclaimed property and generally make that information public. Some states publish the names of all residents with lost or unclaimed property on a yearly basis, maintain a website with this information and/or engage in a variety of other efforts to locate lost property owners.

Use the National Association of Unclaimed Property Administrators search tool to periodically check whether any of your assets have landed in a state's lost or unclaimed property fund. You can also conduct a free multi-state search at MissingMoney.com.

Some dormant accounts might be listed at the firm's address instead of the account holder’s, so be sure to check the lost or unclaimed property listings for the state in which your financial firms are registered as businesses.

Avoiding Escheatment

Unclaimed property laws protect consumers by establishing procedures for returning lost or forgotten assets to owners or their heirs. But you might miss out on interest, dividends or capital appreciation on escheated property.

Consider taking the following steps to prevent your assets from becoming escheated:

• Actively engage with your accounts by periodically logging in or connecting with your brokerage firm or investment professional by phone, email or in person.
• Notify your financial institutions of any changes to your contact information including phone numbers, email and physical addresses even if you primarily view your account information online.
• Don’t ignore messages requesting that you update your mailing address, email address or other contact information. To guard against identity theft, get in touch with the institution using the contact information on its website to verify that it requested the update.
• Contact the firm if you fail to receive account statements or other information they normally send.
• Add a trusted contact to your investment accounts. This authorizes the firm to reach out to that person if there’s concern about your account and they’re unable to get in touch with you.
• Consider consolidating small accounts to simplify management tasks and reduce your chances of forgetting an account.
• Be attentive to mailings from institutions with which you might not be familiar. Financial firms might change names or go out of business.
• Be aware that you could be contacted by a firm handling the affairs of a relative or acquaintance. You might be the recipient of their bequest without realizing you were included in their will or estate.
• Contact your financial institution to determine how it interprets the laws in your state. For instance, ask how your institution handles automatic contributions. Some states don’t count automatic account deposits or withdrawals as active management.

Keep a list of all your accounts and update it regularly. Tax time could serve as an annual reminder to update your records. And make sure your spouse and heirs have access to this list so they can track down your assets should you become unable to do so.