New Year’s Resolution: Escheat Unclaimed Funds, 0118 SCBJ, SC Lawyer, January 2018, #36
| Author | Barbara M. Seymour, J. |
| Position | Vol. 29 Issue 4 Pg. 36 |
Barbara M. Seymour, J.
It’s Monday morning. You have cases on various trial dockets this week. You have four depositions in the next five days. Your paralegal is out with the flu. Your in-laws are coming to town this weekend. Just when you think you can’t take any more, your bookkeeper calls with a quick question. The conversation goes something like this: Bookkeeper: Do we have a formalized policy in place to address unclaimed property?
You: Um. Do what now?
Bookkeeper: I’m filling out this form from the Office of the State Treasurer.
You: Who? … Why?
Bookkeeper: They’re doing a routine audit of our trust account.
You: Wait … What?
When you arrive at the office, you find a letter informing you that the State Treasurer “routinely contacts businesses and organizations to ensure they understand and are in compliance with the State’s unclaimed property laws.” You have been selected for what is called a “routine compliance review” and you have 15 days to complete a questionnaire that asks, among other terrifying questions, whether you have any uncashed checks that have been outstanding for more than five years and whether you are familiar with the South Carolina Unclaimed Property Act. This article will explain a lawyer’s obligations pursuant to the Unclaimed Property Act (UPA); describe the Unclaimed Property Program (UPP) and compliance review process conducted by the State Treasurer’s Office (STO); and address the steps a lawyer should take to ensure compliance with both the UPA and the South Carolina Rules of Professional Conduct.
Application of the Unclaimed Property Act
The South Carolina Unclaimed Property Act applies to any business or organization (a Holder) that is in possession of property that belongs to someone else (the Owner). A Holder under the statute has several obligations: (1) to review accounts on an annual basis to determine if they contain unclaimed funds;
(2) to attempt to locate the Owners and deliver the unclaimed funds to them;
(3) to report the names and last known addresses of Owners who have not been located; and
(4) to escheat unclaimed funds based on a “dormancy period” established in the UPA.
Annual review of all accounts A law firm has several accounts that are subject to the UPA, including the payroll account and the trust account. While this article will focus on issues related to client trust accounts, the general principles apply to other accounts as well. A lawyer must include all accounts that might hold funds that belong to someone else in the annual review.
The good news is that if you are compliant with the Supreme Court’s Financial Recordkeeping Rule, Rule 417, SCACR, you are already complying with the annual review requirement set forth in the UPA, at least with regard to your client trust account. Rule 417 mandates that lawyers conduct month- l y reconciliations of all client trust accounts. That process necessarily requires a review of outstanding transactions, including checks to clients and third parties. Additionally, Rule 1.15(d) of the Rules of Professional Conduct, Rule 407, SCACR, imposes an ethical obligation on lawyers to “promptly deliver funds received on behalf of clients and third parties.” If you are staying on top of outstanding checks by ensuring that they are timely delivered and negotiated in accordance with your ethical obligations, then your worries about the UPA are over. You have nothing to report and nothing to remit. It’s more likely, though, that there is unclaimed money somewhere that kicks in the next step in your firm's obligations under the statute and your individual obligations under the conduct rules.
In connection with your monthly review of the trust account reconciliation, you should examine all outstanding...
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