The process by which a state government claims ownership of a deceased person's accounts who has no heirs or beneficiaries is called escheatment. It is something that everyone needs to know how to avoid to make sure their accounts are not inadvertently seized while they are still alive.
If a person passes away and no beneficiaries or heirs can be found, then the state government will claim the property for itself. Today, many state governments continuously experience revenue shortfalls, and this has led some of them to be overly eager and aggressive about claiming property through escheatment.
What often happens is that an account holder has not stayed in contact with a brokerage or financial institute for a long time. The financial institute then reports the assets in an account as unclaimed property. Rather than making any effort to locate the person who owns the account, the government claims the property as its own. This can create issues for people who have long-term investments as part of their retirement and estate plans.
The tips include:
- Make regular contact with the brokerage, even if it is just to speak to a representative.
- Cash all dividend checks. Even if you think the amount of the dividend is too small to bother with, cash the check so that the brokerage knows a living person is receiving the checks.
- Complete any proxy voting paperwork even if you do not care about it, as this will show that you are still alive.
- Update contact information when it changes so that the brokerage knows how to get in touch with you.
If you follow the above steps, then your estate will not find itself in the position of the government having already claimed your assets through escheatment before the assets could be distributed to your heirs.
Reference: Investopedia (October 29, 2015) "4 Ways to Avoid Escheatment of a Stock Account."
An experience estate planning attorney help you avoid escheatment by having appropriate default heirs listed in your estate plan. Give us a call at (978) 342-1914 or visit us at www.dellamonaca.com.