What is escheatment?

What is escheatment? And why you should be aware of it

Feb 17, 2021 3:50:25 PM

All US states require brokerage firms and financial institutions to report unclaimed or abandoned accounts. Before the account can be considered unclaimed or abandoned, the brokerage firm or financial institution must make a diligent effort to locate the owner. If they are unsuccessful in their attempt, they must report it to the state where the account is held. The state then claims the account through the process of escheatment. Although there are no USA wide figures for the value of escheated funds, individual state records reveal a wealth of unclaimed assets. As of December 2020, New York State holds $16.5 billion in unclaimed funds, $8 million of which is for one estate, and South Dakota currently reports a further $600 million.

The escheatment process takes place when a US account becomes dormant for a period of time specified by state law, typically between three to five years. At that point, the ‘personal property’ is transferred to the appropriate State Comptroller’s Office and usually liquidated. Therefore, a claim for escheated assets becomes a claim for cash monies, held by the state.

Common assets that escheat are bank accounts and shares, including uncashed dividend payments.

The main states that escheat assets are Delaware, New York, Dakota and Arizona. Many US companies are incorporated in Delaware so we most frequently deal with the Delaware Comptroller’s Office. If you think an estate may have escheated assets, Title Research is able to identify the state to which assets have escheated.

Title Research assists Solicitors in the resolution of complex estate administration cases and we often find that US shareholdings have been escheated. Around 20% of cases where we are verifying, transferring or selling US assets feature escheated shares. In this blog, we’re sharing our experience of reclaiming escheated shareholdings and how escheatment can affect UK shareholders.

Reclaiming escheated funds

In our experience, the process of reclaiming escheated funds from a US state is often a lengthy and protracted process. Once the initial claims request form is submitted, we often find that it takes anywhere between 60-90 days for a Case Handler to respond to the case with the second stage requirements.

Once the case has moved to this second stage of the process, we are required to submit the prescribed legal documentation. This task can vary in its timescales depending on what documents are required.

After we have submitted all requested legal documents and the claim has been approved, we expect to receive notification that funds will be released within 90-120 days. This is often received by cheque to the estate.

On average, we have found that claims take approximately 18 months to 2 years for full completion, even with our extensive experience in dealing with escheated assets. We would predict that the process would take even longer for an Executor or Solicitor who is less familiar with escheatment.

In 2020, Title Research successfully claimed escheated funds from a Keurig Dr Pepper shareholding within 6 months. The Keurig Dr Pepper shares were held as part of a UK estate as the deceased had originally purchased shares in Cadbury, which through company actions over the last twenty years, had become shareholdings in Keurig Dr Pepper, Mondelez International and Kraft Heinz Group. From the original Cadbury share certificates, Title Research verified that the deceased had held Keurig Dr Pepper shares and confirmed with the share registrars that these shares had escheated.

How it affects UK shareholders

Escheatment does not exist in the UK so it is a process that most British people are unacquainted with. With more UK companies being acquired by US entities, the risk of UK shareholders subsequently becoming US shareholders is becoming increasingly likely. This highlights how UK citizens with US assets should be aware of the escheatment process. As this blog outlines, it can incredibly complicated to reclaim escheated assets so it’s important for US shareholdings to stay active.

If you’re administering a deceased person’s estate, it can be easy to postpone dealing with US shareholdings until a later date. Dealing with US assets can be difficult in the best of circumstances, as our article highlights, so we highly recommend dealing with the shares as early as possible to avoid them becoming escheated.

Title Research are experts at navigating the complex process of selling and transferring shareholdings in North America. We have extensive knowledge of different state processes and can maximise the value of the estate for the beneficiaries, by recovering any escheated assets.

As a first step, we recommend updating the registered address on the account to an address where correspondence will be dealt with, such as to your office address. This can be done as soon as there is a UK Grant of Probate or Letters of Administration for the estate. It is also best practice to cash any dividend cheques into an estate account and thereby maintain activity on the account.

If you’d like to find out more about how Title Research can help you retrieve escheated assets or administer North American shares and funds, call our Client Services Team on 0345 87 27 600 or email info@titleresearch.com.

Topics: North America, Federal Transfer Certificate, Escheatment, US Shareholdings