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 What Does “Escheat” Mean?

The term “escheat” applies when a person’s property reverts back to the government after a specific event, typically after a person’s death when they died without any heirs. Escheat laws allow the government to claim title to a certain piece of property where no other people have a right to inherit or claim the property.

In the United States, escheated property usually passes to the state governments because it is the state probate court, not the federal government, that deals with wills and estates and cases of intestacy (intestacy means dying without a will).

Escheatment only occurs if no property owner is identified after a certain period, usually five years.

What Does the Government Do with Escheated Property?

Generally, state governments provide that escheated property will go to some designated political subdivision. The exact usage or designation of the property may depend on the state’s needs at the time.

Escheat laws are a significant source of revenue for the more rural states. Such laws allow property that would otherwise be unused to be sold and thus be put into active use, generating local tax revenue for local counties or jurisdictions.

What Kinds of Property are Subject to Escheat?

As the word “escheat” is currently used, all property, real and personal, and all property rights of any nature, can be subject to escheat. In most states, however, abandoned or unclaimed intangible personal property is often subject to “custodial taking” statutes rather than true escheat. (In custodial taking, the state does not take ownership of the property but rather takes care of it for the benefit of whoever may be the owner.) Any doubts regarding whether property is subject to escheat may be taken up and resolved with the state.

When Does Property Escheat to the Government?

Under escheat laws, the state is entitled to take the property of those who die without leaving anyone eligible to take their property through intestate succession. Every state has its own set of intestate succession laws. These laws dictate the order in which property or assets belonging to the estate will get distributed and to whom.

The general rule of thumb is that the surviving spouse of someone who dies intestate will usually be the one who receives their property. If there is no spouse, the children will inherit the property. If there are neither spouses nor children, each state designates other close relatives – such as parents, siblings, cousins, etc. Escheat laws only apply if no people with the legal right to inherit the property are alive or can be found.

The existence of heirs does not necessarily prevent the government from taking property by escheat. If such heirs are legally incompetent (mentally unfit) to take property by inheritance under the state’s laws, the situation will be the same as if there were no heirs. In such cases, the property will escheat back to the state. Escheatment can also happen if there’s a single heir and that heir murdered the property owner.

There may be various timetables and deadlines involved regarding property escheatment. For instance, in California, any property that becomes abandoned or for whom no legal owner is found is classified as “unclaimed property.” If the property remains unclaimed after three years, it will be escheated or transferred to the California government.

In most cases, the state must provide notice of escheat actions. Notices are published in county newspapers. This gives a chance for interested parties to learn that the property is subject to escheat, and then they can respond formally to claim ownership of the property.

In some states, when property escheats to the state, further waiting periods may be involved. For instance, in California, if the property has been subject to escheat to the state for five years, and no legal owner ever claims it, it is subject to “permanent escheatment” to California. This means that California can then use the property for its own purposes. It can also choose to sell the property, with the sales proceeds being deposited in the state’s general fund.

How Can Property Become Unclaimed?

As mentioned, one of the reasons why a property may be subject to escheat is if it gets classified as “unclaimed.” This can happen in several different ways. One common way is when a person dies and fails to address their property in a will document properly. If the person left no will, or the heirs or beneficiaries can’t be located or identified, then there is a chance the property might go unclaimed. In such a case, the state may take title of the property for its own purposes and usages.

Escheat can happen outside of the area of property left after death. Any unclaimed property can be subject to escheat. For example, if tenants move out of their rental properties and fail to collect security deposits or when they leave personal property at the address, that property is subject to escheat.

In such cases, the assets may escheat to the state if the deposits or property are unaccounted for after a certain period (for instance, 5 years). Other examples include leaving a job without remembering to take along money invested in a 401(k) or closing a bank account without realizing it still had money in it.

Both real property (land or buildings) and personal property (movable items) can be escheated to the state, depending on local laws.

How Can I Ensure that the Property I Own Does Not Escheat to the State?

One reason that property becomes unclaimed and escheats to the state is that the owner failed to draft a will. Thus, having a valid will in place can help ensure the property is distributed to whomever you want it to go to. If you have no relatives, you can leave it to a friend or a favorite charity.

Making a well-crafted will aid greatly in preventing escheat situations. Ensure that the persons to whom you want to make gifts from your estate know about your plans and have copies of your will so that the property doesn’t escheat to the state simply because no one knew there was a will. Finally, ensure that your beneficiaries will be notified when you die to prevent escheat arising from no one knowing that you have passed and that there is a will.

Concerning bank and other accounts, keep track of them. Regularly check all your accounts, including checking, savings, investments, and insurance accounts. If you’ve got a retirement account through work, move it over to your new work investment account or an independent one, like an IRA. Also, update your information if you move.

The best way financial institutions can contact you is to make sure your information is up-to-date. If you’ve moved or gotten a new phone number or email address, ensure your accounts reflect the most accurate information.

Should I Hire a Lawyer if I Have Legal Issues Involving Escheat Laws?

The laws governing escheatment can be complex and can vary widely by state. Your best option is to hire a local property lawyer to help you draft a will naming those you wish to receive your property once you pass away. A local lawyer can provide legal guidance according to the relevant state laws that might affect the property.

An attorney skilled in drafting wills and trusts will help you ensure that your property goes to the people or entities that you wish to receive it and not to the government. If any legal disputes arise and negotiations with the state or a lawsuit become necessary, your attorney can also provide representation in such situations.

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