Pennsylvania’s Unclaimed Property Law – Escheat Is Neat
You may have heard about the law of unclaimed property, or “escheat”, but what is it? How does it apply to your business? How does the state get unclaimed money? How can you get unclaimed funds back if you can prove that they belong to you? What does Pennsylvania law require that businesses do with any unclaimed property they have? These are all good questions, but first we must consider how “unclaimed property” is defined.
What is “unclaimed property”?
Unclaimed property is both tangible and intangible property that is considered abandoned or unclaimed because someone other than the rightful owner holds the property for a designated period of time. The time limits vary for different types of property. A vast array of property is covered by a state’s escheat laws; the following are some examples:
- A lost inheritance
- Unclaimed stock dividends
- Forgotten insurance policies
- Forgotten paychecks
- Neglected safe deposit boxes
- Overlooked membership fees
- Court deposits
- Credits or overpayments
- Money orders
- Travelers’ checks
- Dormant/closed bank accounts
- Unused and electronic gift certificates
- Stored-value cards
- Valuables that families have misplaced over the years, such as jewelry, rare coins, and stamps.
- E-tickets and frequent flyer miles
In October 2002, the NBC television program Dateline reported that Pennsylvania has, at last count, $15 billion in unclaimed property. Barbara Hafer, Pennsylvania’s State Treasurer, reported that one in 14 Pennsylvanians has unclaimed property. Ms. Hafer stated that cash is not the only thing that is left unclaimed in Pennsylvania. “Every imaginable valuable people have left behind: diamonds, sapphires, a vintage Barbie Doll, a purple heart,” says Hafer. “Almost all of it – incredibly – forgotten by owners and lost to unsuspecting heirs.”
How does the state get the unclaimed property?
By law, companies that owe others money and cannot find them are required to turn the cash over to the state. “Escheat” means the transfer of title to the state, whether or not the property may be reclaimed. The laws of the individual states determine what type of property is escheatable, and the amount of time, or “dormancy period,” which applies before the property must be reported as unclaimed. Unclaimed property in Pennsylvania is governed by Pennsylvania’s Disposition of Abandoned and Unclaimed Property Act, 72 P.S. §§ 1301.1-1301.29, also known as Pennsylvania’s “escheat” law. This law governs who will ultimately own and control abandoned funds. The law also requires businesses holding unclaimed property to turn over, or escheat, the unclaimed property to the state, which then holds the property in trust for the rightful owner.
How can you get your unclaimed property back if you discover it belongs to you?
Pennsylvania, along with many other states, has created a website dedicated to unclaimed property, where individuals can determine if the state holds property in their names. In Pennsylvania, you can search for unclaimed property that may belong to you on the Pennsylvania Treasury’s website, which can be found at http://www.patreasury.gov/ Unclaimed/Search.html. The Treasury maintains continual custody of the unclaimed property until it is claimed by the rightful owner, or his or her heirs. There is no time limit to claim your property and if at any time you can prove ownership, the Treasury will return it to you at no charge.
What does Pennsylvania law require businesses to do with regard to any unclaimed property they hold?
Pennsylvania’s escheat laws can apply to a wide variety of businesses, including financial institutions, utilities, insurance companies, stock brokerages, government agencies, manufacturers, wholesalers, and retailers. There is a Uniform Unclaimed Property Act, which acts as the basis for many states’ escheat laws. Many states have adopted this Act, but some have amended it significantly. Therefore, because the state laws vary, businesses must examine the various states’ laws that govern their operations.
On June 29, 2002, changes were made to Pennsylvania’s “Unclaimed Property Laws,” reducing the timeframe for reporting abandoned property from seven to five years and for reporting payroll checks that have not been cashed from seven to two years. Pennsylvania requires businesses to record and report unclaimed property annually, by April 15th. A business that cannot locate the owner of unclaimed property must turn the property over to the state after the dormancy period. After the state receives the unclaimed property, it often attempts to locate the rightful owner.
A business owner in Pennsylvania must be wary of the escheat laws and take them into consideration when planning the business’s legal organizational structure. If a business does not comply with the reporting requirements in Pennsylvania, it may face fines and possibly an unclaimed property audit.
In addition, escheat laws from other states should be taken into consideration when a business owner decides where to incorporate. This is important because when an unclaimed property owner’s address is not known, the escheat laws of the state where the business which holds the unclaimed property was incorporated will govern. No matter where a business is located, however, those companies that regularly hold escheatable property should develop a recordkeeping system that keeps track of property owners’ addresses.
In summary, a thorough evaluation of Pennsylvania’s “Unclaimed Property Laws” is important, if not essential, and can ensure that a Pennsylvania business is in compliance with all relevant requirements. It is important for a business to plan its unclaimed property reports carefully. As mentioned above, failure to report escheatable property may result in significant fines and possibly an audit.
In a time when states are looking to enhance their budgets with non-tax dollars, escheat is becoming a growing area where states are auditing and seeking greater collections. For this reason, businesses should seek counsel to determine their escheat reporting obligations, their potential liabilities, and their potential planning alternatives to lessen their escheat exposure.
The attorneys at Wolf, Baldwin & Associates, P.C. have been counseling businesses on their obligations for a combined total of over fifty years. Being general practitioners, we have the breadth of knowledge to help you learn and protect your rights over a wide range of business and civil litigation cases. Please click here to contact us now.
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