Unclaimed property is money or other financial property that a business holds for someone who has not claimed it or been in contact for a set period. Escheatment is the legal process by which the holder reports and transfers that property to a government, usually a US state, which keeps it in custody for the owner. Typical examples include forgotten savings accounts, uncashed payroll and vendor checks, insurance proceeds, securities, refunds, money orders and, in some states, unused gift card balances.
Unclaimed property law is mainly a US matter of state law, and each state sets its own rules on what counts, when it is presumed abandoned and how it is reported. The process is related to, but separate from, a dormancy fee, which deducts value from an idle account, and from gift card breakage, which a seller may recognize as revenue only for value it does not have to remit to a state.
Unclaimed property in plain terms
Think of a lost-and-found desk at a train station. If you leave an umbrella behind, staff hold it for a while, and if nobody collects it they send it to a central office rather than keeping it. Unclaimed property works the same way for money. A bank, employer or retailer that is holding your funds and cannot reach you does not get to keep them. After a waiting period it sends them to the state.
The state then acts as the central lost-and-found office. It lists the names of owners in a public database, and anyone who finds their name can file a claim and get the money back, usually with no deadline. In the meantime, the state can use the cash, which is why unclaimed property has become a meaningful source of public revenue.
History and legal basis
The word escheat comes from feudal England, where land reverted to the lord or the Crown when a tenant died without heirs, a principle carried into common law. Modern US statutes are custodial rather than confiscatory: the state takes the property but the owner keeps the right to reclaim it. The Uniform Law Commission published model acts in 1954, 1981 and 1995, and the Revised Uniform Unclaimed Property Act in 2016, which a number of states have adopted in whole or in part.
Because property can be connected to more than one state, the US Supreme Court set priority rules in Texas v. New Jersey (1965). The state of the owner's last known address, as shown in the holder's records, has the first claim. If there is no address, the state where the holder is incorporated takes it. The Court reaffirmed these rules in Pennsylvania v. New York (1972) and Delaware v. New York (1993). For money orders and traveler's checks, a 1974 federal statute instead favours the state where the item was bought, which the Court applied against Delaware in a unanimous 2023 decision over MoneyGram instruments.
How escheatment works
- Dormancy period. Property is presumed abandoned after a set time without owner contact, commonly three to five years depending on the state and the type of property.
- Due diligence. Before reporting, the holder must try to reach the owner, usually by mail or email to the last known address.
- Reporting and remittance. Holders file periodic reports listing owners and amounts, and transfer the funds to the state.
- Claims. Owners or heirs claim property from the state, often through the national search site run with the National Association of Unclaimed Property Administrators.
- Audits. States audit holders, sometimes using contract auditors paid a share of what they find, and can assess interest and penalties for unreported amounts.
Gift cards and payment products
Treatment of prepaid gift cards and other stored value varies widely. Some states exempt gift cards entirely, some claim the full unused balance after the dormancy period, and others take only part of it. Many retailers set up dedicated gift card subsidiaries in states with favourable rules, a structure that state auditors have challenged. The federal Regulation E gift card rules govern fees and expiry but do not override state escheat laws, so an issuer of a closed-loop store card must track both.
For companies, balances subject to escheat stay on the books as a liability, part of deferred revenue for gift cards, until remitted. Payment businesses such as a money transmitter also face escheat on uncashed money orders and outstanding payment instruments, and many state money transmission laws sit alongside these obligations. Dormant checking accounts are among the largest categories reported by banks.
Delaware and criticism
Because so many large US companies are incorporated in Delaware, the second priority rule sends it a large share of property with no owner address. Abandoned property has long been one of the state's largest general fund revenue sources; state finance reports show about $554 million a year in recent fiscal years. Delaware's audit practices drew sharp criticism in Temple-Inland v. Cook (2016), where a federal court found that an audit's use of estimation violated due process, and the state revised its law in 2017.
Critics argue that some states treat escheat as a revenue tool, that dormancy periods have been shortened to bring money in sooner, and that owners are not always told their property has moved. Outside the US, regimes differ: the United Kingdom's Dormant Assets Scheme channels bank balances untouched for 15 years to good causes while owners keep the right to reclaim them.