Unclaimed property escheats to the state.

• Author: Boucher, Karen J.

Many businesses outside the financial industry are unaware of their liability under state unclaimed property laws. Almost every state has legislation requiring property holders to report and deliver to the state various types of abandoned or unclaimed property, including certain intangibles.

Common types of unclaimed property include:

* Credit balances.

* Customer overpayments.

* Security or other deposits.

* Uncashed refund checks.

* Uncashed accounts payable checks.

* Unidentified remittances.

* Returned interest and dividend checks.

* Unused gift certificates.

* Credit memos.

* Uncashed payroll checks.

State unclaimed property laws typically require businesses to turn over, or escheat, to the state unclaimed property if certain conditions leading to a presumption of abandonment are satisfied. Generally, intangible property is presumed to be abandoned if it is held or issued in the ordinary course of the holder's business and has remained unclaimed by the owner for more than a specific period of time (typically five years) after it becomes payable or distributable. The requirements and time periods under which intangible property is presumed to be abandoned vary among the states, and in some states differ depending on the type of property. For instance, several states require payroll checks unclaimed for only one year to be transferred to the state.

Many businesses mistakenly believe they become the owners of these unclaimed properties.

Example: X sends a $1,000 check to a vendor in payment of an invoice, but the check is never cashed and the vendor does not notify X that any further payment is due. While X might incorrectly believe it can keep the $1,000, if the check is not cashed within the designated period, X must report it as abandoned property and transfer the $1,000 to the state.

Generally, every person holding property presumed to be abandoned and subject to unclimed property provisions must file an annual report with the state listing the property that became abandoned...