Escheatment laws require businesses to report and turn over unclaimed property—such as uncashed checks, unclaimed insurance benefits, or dormant bank accounts—to the state after a certain period of inactivity.
These abandoned property laws protect consumers while ensuring unclaimed assets are properly accounted for. For businesses, compliance with escheatment laws is not just a legal obligation but a crucial part of financial and risk management.
Failure to follow state-specific regulations can lead to hefty fines, audits, and a damaged reputation. Understanding and adhering to these laws helps companies avoid penalties and maintain trust with customers and regulatory authorities.
What is Escheatment?
The legal process of escheatment transfers unclaimed or abandoned property to the state after a designated period of inactivity. This ensures that assets—such as dormant bank accounts, uncashed checks, security deposits, and forgotten stock dividends—are properly managed rather than remaining in limbo.
Common types of unclaimed property subject to escheatment include:
- Uncashed payroll checks
- Dormant savings or checking accounts
- Life insurance proceeds
- Utility deposits
- Unredeemed gift cards
Meeting State-Specific Escheatment Requirements
Escheatment laws by state vary, and businesses operating in multiple jurisdictions must navigate different reporting deadlines and requirements. Staying informed and compliant ensures smooth operations and minimizes noncompliance risks.
By implementing a strong escheatment process, businesses can mitigate legal and financial risks, maintain regulatory trust, and operate smoothly.
States with unclaimed property reporting deadlines in the spring are:
Spring Filing State Escheatment Deadlines
Delaware
Deadline: March 1
Reporting Period: January 1 – December 31
Due Diligence: Written notice 60 to 120 days before filing.
New York
Deadline: March 10
Reporting Period: January 1 – December 31
Due Diligence: First-class mail notice 90 days before the final report; certified mail notice 60 days before if no response.
Connecticut
Deadline: March 30
Reporting Period: January 1 – December 31
Due Diligence: Written notice within one year before presumption of abandonment.
Pennsylvania
Deadline: April 15
Reporting Period: January 1 – December 31
Due Diligence: First-class mail notice 60 to 120 days before filing.
Florida
Deadline: April 30
Reporting Period: January 1 – December 31
Due Diligence: Written notice 60 to 120 days before filing.
Illinois
Deadline: April 30
Reporting Period: January 1 – December 31
Due Diligence: Written notice 60 to 120 days before filing.
Vermont
Deadline: April 30
Reporting Period: January 1 – December 31
Due Diligence: Written notice 60 to 180 days before filing.
Why Escheatment Compliance Matters for Businesses
Escheatment compliance is a key aspect of financial and risk management. Mishandling unclaimed property can result in severe consequences. Here’s why businesses must take escheatment compliance seriously:
Avoid Penalties and Audits
Noncompliance with escheatment laws can lead to significant interest and penalty assessments, and legal actions from state authorities. Many states conduct audits to ensure businesses properly report and remit unclaimed property. Staying ahead of obligations can prevent costly settlements and disruptions to your business and it resources.
Maintain Financial Integrity
Accurate financial reporting is essential for any business. Properly tracking and managing unclaimed property helps:
- Maintain clean financial records
- Reduce the risk of unexpected liabilities
- Ensure compliance with accounting standards
Protect Business Reputation
Mishandling unclaimed property can damage a company’s reputation and erode customer trust. Compliance demonstrates:
- Transparency
- Ethical business practices
- A commitment to financial responsibility
Reduce Operational Disruptions
By being proactive, businesses can avoid time-consuming audits and investigations. This allows them to focus on growth and operations.
Key Components of Escheatment Laws
Dormancy Periods
The dormancy period refers to the length of time the property can remain inactive before being considered unclaimed. This varies by state and property type, typically one to five years.
Due Diligence Requirements
Before reporting property as unclaimed, businesses must attempt to contact the rightful owner. This often involves sending written notices within a specific time frame before filing. States have different due diligence requirements, including notification methods and deadlines.
Reporting and Remittance Deadlines
Each state sets its own deadlines for businesses to submit unclaimed property reports and remit funds. Failure to comply with these deadlines can result in interest & penalty assessments and time-consuming and costly audits.
Steps to Ensure Compliance with Escheatment Laws
Track Dormancy Periods
Businesses should establish a system for monitoring financial transactions to identify accounts approaching dormancy. Automated tools, like UPNavigator® and regularly scheduled internal self-audits help ensure accurate tracking.
Conduct Due Diligence
Before reporting unclaimed property, businesses must make a good-faith effort to contact the owner, often through written notices. Keeping records of all outreach efforts helps demonstrate compliance.
Prepare and Submit Reports
Each state has unique reporting formats and deadlines. Businesses should stay updated on state-specific requirements and use compliance tools or professional services to streamline reporting.
Remit Unclaimed Property
After submitting reports, businesses must transfer unclaimed property to the state. Keeping detailed records of all escheatment-related transactions is essential to demonstrate compliance in the event of future audits.
Challenges and Best Practices
Common Compliance Challenges
- Tracking different state laws and deadlines
- Identifying unclaimed property from incomplete records
- Manual processing errors leading to inaccurate reporting
Best Practices for Staying Compliant
- Implement a structured escheatment policy with routine audits and employee training
- Keep detailed records of financial transactions and customer interactions
- Regularly review state laws and update compliance procedures
Utilize Automated Solutions Like UPNavigator®
Managing escheatment manually can be time-consuming and error prone. Automated tools like UPNavigator® help businesses:
- Track dormancy periods
- Generate accurate reports
- Stay updated on state-specific regulations
Leveraging automation reduces compliance risks, saves time, and ensures timely reporting.
The Importance of Escheatment Compliance
Escheatment compliance is essential for businesses to avoid legal risks and ensure unclaimed property is properly handled. Noncompliance can lead to penalties, audits, and a damaged reputation. By proactively tracking dormancy periods, conducting due diligence, and following proper reporting procedures, businesses can protect themselves while maintaining trust with customers and stakeholders.
Stay Informed and Be Proactive
Escheatment laws and requirements vary by state and change frequently. Regularly reviewing regulations, implementing best practices, and leveraging automation can help businesses avoid compliance risks. Businesses that are committed to ethical financial management and customer trust prioritize escheatment compliance.