The difficulty of accessing dormant assets in the United States - escheatment

Did you know that if you have done nothing with any US assets you own in the last three to five years, various financial institutions and brokerage firms can be given the authority to turn them over to the State in which they are located?

In the US, if there has been no activity or contact by the owner of an asset for a designated period, it can be regarded as unclaimed or abandoned. Once property is deemed unclaimed or ‘dormant’, a thorough investigation must be undertaken to try to locate the owner. However, if these searches are unsuccessful, this must be reported and, by law, the asset is turned over to the State in which the property is located.

This process, when dormant assets are claimed by the US state where they are situated, is called “escheatment”.

Below are some examples of unclaimed property located in the US that can become escheated:

• current and savings accounts
• contents of safe deposit boxes
• shareholdings, including uncashed dividends
• stocks
• life policies
• annuities
• traveller’s cheques
• inheritance and trust distributions
• refunds
• deposits

The most common instances of unclaimed property involve bank accounts and shareholdings. Over the years, many UK companies have been acquired by similar firms in the US, thus making the UK shareholder a US shareholder through no action of their own.

Depending on the dormancy period of each State, the asset will be transferred to the State Comptroller’s Office and, most often, turned into cash. Most claims for escheated assets are, therefore, for liquidated funds.

The time before an asset is deemed dormant depends upon the law in the US State in which it is situated. The dormancy periods in the main States in which escheatment occurs are:

• Arizona – three years
• Delaware – five years
• New York – three years
• South Dakota – three years

The above dormancy periods relate to bank accounts, but these may differ for other types of personal property. Many US banks and registrars are incorporated in Delaware.

According to the National Association of Unclaimed Property Administrators, it is estimated that around one in seven people (33 million altogether) collectively have approximately $70 billion worth of unclaimed property held by State governments and treasuries within the United States. As of December 2020, it was declared New York’s State treasurers held funds of around $16.5 billion and South Dakota reported an additional $600 million. It is possible to reclaim escheated assets but, once they have been claimed by the State, this is a much more difficult and expensive process and claims by claimants outside of the US can take a significant amount of time.

In 2023, the average value of each unclaimed property claim was $1,154 and over $5 billion was returned to rightful owners. Many claims are for very small amounts, but some are in the six or seven figure range.

Escheatment becomes even more complicated if you die owning US assets.

US companies will not accept UK death certificates as proof of an executor’s authority to act in a deceased’s estate, and it is not possible to amend registered addresses, or any other details, until Probate has been granted. It has been our experience, on several occasions, that financial institutions and/or brokerage firms in the US are unlikely to correspond with executors, or solicitors acting for them, at all until the Grant of Probate has been registered on the account or holding. Given these difficulties, the escheatment process can significantly delay the winding-up of a deceased’s estate.

In the UK, the process to apply for Probate currently takes a lot longer than in previous years and, depending on the complexity of a Grant of Probate to administer an estate, can take several months. This is an even longer process if the estate is liable for inheritance tax. Where there is any possibility of escheatment, it is imperative any US assets are dealt with as soon as possible following issue of the Grant of Probate.

How do I regain US assets?

The first step in reclaiming escheated assets is to ensure the registered address on the asset is updated to the executor’s or solicitor’s address, although it’s not possible to do this until Probate has been obtained and submitted to the US asset holder.

The second stage is submission of the necessary legal documentation. The timescale for this is very much dependent on the specific paperwork requested.

The reclamation process is a specialised area of work and, in particularly complicated situations, we would normally instruct a firm with US jurisdictional experience of escheatment to do the legwork on our behalf. However, even when specialist firms are instructed to deal with these matters, the process on average takes around 18 months to two years to be fully completed.

It is most important to bear in mind, the longer the dormancy period, the more difficult and expensive it can be to reclaim the escheated assets. It is essential that action is taken to avoid escheatment as early as possible.

Dealing with assets in foreign jurisdictions does not form part of our standard estate administration process and separate quotes will be provided upon request. If you need help with estate administration, please email us or call +44(0) 3333 231 580.