Escheat

Escheat is the legal process by which property reverts to the state, occurring either when a person dies without leaving a will and has no identifiable heirs, or when property such as a bank account has been inactive for a defined statutory period. In modern practice, escheat is most commonly encountered through dormant bank accounts, uncashed checks, and unclaimed insurance proceeds being turned over to state unclaimed-property programs.

Escheat is not a permanent forfeiture of the rightful owner's claim; most jurisdictions allow the original owner, or their heirs, to file a claim with the state to recover escheated funds, sometimes years or even decades after the property was originally turned over.

If a bank account sits completely untouched for long enough and the bank cannot find its owner despite reasonable attempts, the law eventually requires the bank to hand the money over to the state rather than simply keep holding it indefinitely or absorb it as unclaimed profit. The state then becomes a kind of custodian, holding the funds until the rightful owner, or their heirs, eventually comes forward.

This is why it is worth checking state unclaimed-property databases if you suspect you or a deceased relative may have forgotten accounts — the money is very likely still recoverable, just held by a different custodian now.

A dormant account that remains inactive and unreachable past the statutory dormancy period set by the relevant jurisdiction is reported and transferred by the holding institution to the state's unclaimed-property office, following required attempts to locate the owner beforehand.

Separately, if a person dies without a valid will and no legally identifiable heirs can be found, their estate itself can escheat to the state, though this outcome is relatively rare given how broadly most inheritance laws define potential heirs before reaching that final step.

Most jurisdictions maintain a public unclaimed-property database and a formal claims process that lets rightful owners or their heirs recover escheated funds by providing proof of identity and ownership, generally with no time limit on when such a claim can be made.

Escheat obligations extend well beyond banks to a wide range of businesses holding customer funds, including unredeemed gift cards in some jurisdictions, uncashed insurance checks, and unclaimed utility deposits, meaning companies across many industries must periodically report and remit unclaimed property to the state rather than simply retaining it indefinitely.

Most escheat laws require the holder of unclaimed property, such as a bank, to make documented, reasonable attempts to locate the rightful owner before turning the property over to the state, typically through mailed notices to the last known address, and failing to perform this required due diligence can expose the holder to penalties even after the property is eventually escheated.

States generally hold escheated property indefinitely on behalf of the rightful owner rather than treating it as general government revenue, though in practice the funds are often deposited into the state's general treasury and effectively used for public purposes while awaiting a claim, with the state remaining obligated to pay out the full amount if a valid claim is eventually made.

When a dormant account's last known address is uncertain or spans more than one state, courts have generally applied a priority rule giving the state of the owner's last known address the first right to escheat the property, with the holder's own state of incorporation only taking priority if no address is known at all.