According to a 2015 California Legislative Analyst’s Office (“LAO”) report, unclaimed property is the fifth largest revenue source for the State of California. This report also acknowledges the “tension” between State interests and an individual owner’s property rights.
The term “Tension” does not fully capture the scope of the restrictions States have placed on the civil liberties and property rights of individuals, once their property “escheats” to (becomes controlled by) the State. The national reunification rate is approximately 34%. “Reunification” is when funds are returned by State administrators to the legitimate property owners. The LAO report suggests a 50 to 60% reunification rate is achievable. This finding is consistent with independent research conducted by Choice Plus, LLC and reported to the Uniform Law Commission. The net result is that annually, approximately 1 billion dollars are artificially retained by States in the name of “consumer protection.”
Unclaimed money california is property which was initially held by financial institutions, insurance companies, utility companies, employers, courts, etc. on behalf of a property “Owner.” Such institutions and companies are referred to as “Holders.” When an Owner has property in the hands of a Holder and has not interacted with the property or the Holder for a period of time, referred to as the “Dormancy Period,” the property becomes “Dormant.” When the dormancy period expires, the law requires the Holder to report and turn the property over to the appropriate State unclaimed property Administrator.
Original holders turn about $6 billion over to States annually. An accumulation of approximately $60 billion remains unclaimed.
Holders and Administrators are “Custodians” of property. A Custodian is defined as a person or entity that holds property in safekeeping for another. In the case of dormant and unclaimed property, the custodian may use the property while it remains unclaimed or dormant. Original Holders act as the first Custodian. When the dormancy period has been reached, and property is turned over to the State Administrator, the Administrator then becomes the custodian. Custodians have a duty to protect the interests of the property owners.
In the past some Holders used accounting techniques, legal arguments, and other methods to manipulate dormant account information so that the Holder could keep control of and use the property indefinitely, or at least for as long as possible. Self-interest guided these actions and caused some Holders to abandon their custodial duty to protect the interests of the property owners. The modern unclaimed property system has resolved many of these issues through litigation, consumer protection legislation, and enforcement efforts.
Unfortunately, the fundamental moral hazard with unclaimed property has not gone away. Custodians have a tendency to manipulate business practices, laws, and policies in ways that benefit the custodian instead of the property owner. These manipulative practices deprive persons of property they have a legal right to.
States are allowed to consume unclaimed property as soon as it is received to fund public programs and fill budget gaps. States self-interest motivates legislators and administrators to manipulate laws and policies in the name of “consumer protection” to inhibit and prohibit people with a legal interest in the property from being able to exercise their right to gain possession of it.