Jenny Rozelle, Host of Legal Tea
Current Trends - Unclaimed Property - Episode 37
Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle. Welcome back for another episode of Legal Tea! Today’s topic is a current trend … something going on in current time, that is pertinent to my world. Today’s topic is on unclaimed property – you know what this is, right? Well, if you don’t, every single state has enacted the Unclaimed Property Act. In case you have no idea what I’m talking about, I found a presentation, funny enough released by the Indiana Attorney General’s Office, explaining the Unclaimed Property Act, its purpose, etc. According to that, the purpose is to “protect the interests and property rights of the lost owner, relieve the holders from the expense and liability associated with the property, and ensure than any economic windfalls benefit the public, not the individual holder.”
So, what’s that mean? Basically, it’s a one-stop shop for collecting property of the state citizens that has not been claimed …. Or a third party owes to a state citizen and that person has not cashed the check, for example, the third party sent them. According the report, the “holder” of the unclaimed property holds the property for 25 years and actively attempts to locate the owner of the property. After 25 years, the funds are absorbed and can no longer be claimed. While the property (it’s usually money) is held by the State, though, it is “used for the good of the citizens.” What that means? Your guess is as good as mine, but I’m certain there are requirements, oversight, etc. (At least that is what I’ll tell myself!) By the way, all of this is from that Indiana report, so I’m sure MOST states are fairly similar in how they operate.
Before we go much more deep, the reason we’re talking about this topic today is because I very recently stumbled upon an article on Yahoo released on February 25th, 2022 in their Yahoo Finance section by Kerry Hannon about Unclaimed Property – specifically retirement accounts. I’m linking the source, of course, to this episode. When I started reading the article, I thought it would be quite TIMELY to talk about because given the state of our country and world, there’s been a lot of people leaving jobs, moving on to other things, etc. (They’re calling it the Great Resignation Movement!) Many positions, as part of an employee benefit package, offer a retirement plan – i.e. 401K, 403B, IRA, etc. etc.
In the shuffle of leaving a job and/or moving to a different job, there sure is a lot going on, right? Just when you think, “How on earth could people FORGET about money in retirement accounts?!” Well, they do. Sometimes, people truly forget the account even exists … sometimes people think, “Ohhh, it’s only got a couple thousand in there…I’ll leave it there for now.” THEN they forget about it. Hence this episode! Actually, according to the research conducted by TIAA, one-third of people have left a retirement account at a past job. As the Yahoo Finance article states, “the smaller the account, the more likely it’s overlooked.” But think about when you add ALL those accounts “forgotten about” and “overlooked.” Sheesh!
Then, when those people forget about the accounts, THAT is when sometimes people get careless, start not responding to communication from the companies, and ultimately, as a result, lots of money ends up heading to the states’ unclaimed property fund (wherever the person resides or was last known to reside). As the Yahoo Finance article shares, the accounts that are forgotten about and ultimately end up in unclaimed property funds may “balloon in the next few years” due to the Great Resignation Movement. I think that is a good point – a valid point.
Beyond this point, a study was conducted by an assistant professor of Risk and Insurance at the Wisconsin School of Business and the Yahoo Finance article references such study – it showed that a whole additional chunk of retirement accounts are technically “abandoned” (as in the owner has very, very, very likely forgotten about them or passed away) but the account is still at the institution that holds the retirement account and not made its way to the unclaimed property fund because the institution may not have put two-and-two together. That, they probably should be handing them over to the state’s unclaimed property fund, but maybe they haven’t been notified of the person’s passing; maybe they haven’t realized it’s been “x” period of time and it should be handed over, etc.
The professor that conducted the study shared, “We found that nearly 3% of Americans have at least one retirement account that has been abandoned at age 73, and that the median account holds nearly $6,000 – with nearly a quarter of abandoned accounts being above $25,000 in value.” Interesting little nugget – SO much LOST money! Her study is fascinating – you should take a look. There’s a link to her study in the source links for the episode.
Another element of this situation is that sometimes the financial institutions change hands so often, that it is difficult to “keep up” with who CURRENTLY holds the retirement account. After all, if you’re like a lot of Americans, we’re all working – all working hard to make ends meet, that many don’t keep track of changing institutions that manage the employer-based retirement account. Maybe the account started with American Funds, then went to Wells Fargo, then went to Morgan Stanley, then went back to American Funds, then went to …. Etc. I see this happen often with life insurance companies, too.
So, then when you’re asking, “Okay, who holds your retirement account?” Or, “Who holds your life insurance policy?” You’re thinking, “Well that’s a good question…” And what if a tragedy hits and you become incapacitated or pass away? If you, yourself, did not keep track of the last place that held your account, probably not a high probability that your family, or whoever has to step in and take care of legal affairs, have any idea of where they are either! Then, what happens? Well, the subject of this episode – it could end up in unclaimed property!
Of course, once it hits unclaimed property, like we chatted about earlier, it’s still YOUR burden to make a claim and get your money back. According to the Indiana Attorney General’s report that I referenced earlier, it shared a little about the efforts their office makes in trying to get the property to the rightful owner. That includes:
- Annually, they release a lengthy publication of all the names that hold unclaimed property. Specifically, it claims they publish it in the newspaper in the county that the person was known to last reside.
- The Office participates in various events to “get the word out” about unclaimed property – events like the Indiana State Fair, Library Days, Indiana Black Expo, etc.
- Have a full-time staff member that is supposed to proactively be looking for owners of unclaimed property; and
- Send out letters to owners of unclaimed property (to the last known address).
Back to the Yahoo Finance article, it shares something that I was unaware of – they claim that lawmakers have attempted to introduce and pass legislation to help individuals be able to track accounts through a “national clearinghouse.” That, so far, has not gained any traction. (Side note: If there was such a national clearinghouse, that would be SO wonderful because so many clients, especially after people fall ill or pass away, are totally clueless about assets!) What is funny about this “national clearinghouse” idea is that I’ve said so many times to clients how nice it would be. I suppose I can see why some are not thrilled about it. It’s a definite disclosure of some very private things – and we all know how private people are. I mean, this national clearinghouse would have a WHOLE LOT of information.
Along those lines, can you even imagine the public outcry if this national clearinghouse got hacked into it? Oh my gosh…
Actually! Along these lines, there is a free online searchable resource called the National Registry of Unclaimed Retirement Benefits that, if the employer and/or financial institution that manages the employer’s retirement plan registers themselves and the former employee, it’s a resource to find “forgotten about” retirement account. Interestingly, the Yahoo Finance article, when discussing this resource, shared that the Registry is operated by PenChecks Trust, which is a retirement plan benefit distribution processing provider, does require when you search for retirement accounts to enter your social security number. I find that interesting because it’s almost like a “clearinghouse” for retirement plans, and heck, they must have your social security number to ‘confirm” it’s you… I’ll put a link to the Registry in the source links for this episode, if you care to take a look!
There are a few other resources directly through the government – i.e. Department of Labor – where you can request to be connected with a “benefits advisor” who will assist if a former employer has gone out of business, filed bankruptcy, been acquired by another company (i.e. like when I talked earlier about companies buying each other out!). Or, the Department of Labor, too, has an “Abandoned Plan Search” where you can find where accounts have been closed or are in the process of getting closed (and probably handed over to the state unclaimed property). A last resource, besides the Unclaimed Property Division of your respective state, is that the Pension Benefit Guaranty Corporation has a database of searchable unclaimed pensions. When I looked at their website, it looks like you have to call – their stuff is not “searchable” online.
I found today’s topic to be interesting, for some reason, and I hope you did too. When I was doing the research, a little fun nugget I found in the Attorney General’s report from Indiana shared that they even collect tangible personal property – i.e. jewelry, antiques, toys, video games, etc. etc. Why does that seem funny to me?! And, oh! They have “exempt” property which is collected, but not reported – those are things like: reservation deposits that were forfeited from hotels, rentals, etc.; prepaid cards; gift cards; business-to-business credit balances. So … like what happens to that stuff then?!
Anyway okay, let’s wrap this “current trends/current events” episode up, shall we? Next week’s topic is on estate planning of the rich and the famous – on that episode, we’re going to talk about the iconic Marilyn Monroe! Anyway, we’ll talk about Tony next Tuesday, Legal Tea Listeners. Talk to you then and stay well!