What Are Unclaimed Funds? Definition, How They Work, and Example (2024)

What Are Unclaimed Funds?

Unclaimed funds are money and other assets whose rightful owner cannot be located. Unclaimed funds are typically turned over to the government after a specific period of time has passed.

To claim the funds or assets, the designated owner or beneficiary must file a claim. If the property is part of an estate, the claimant may have to prove their right to it.

Key Takeaways

  • Unclaimed funds are assets whose rightful owner cannot be located.
  • Typically, unclaimed funds and other property are handed over to the state in which the assets are located.
  • This happens after a dormancy period has passed.
  • When unclaimed funds have risen in value, taxes may be assessed and be owed by the claimant.
  • States have established processes whereby legal owners of assets can reclaim unclaimed funds.

Understanding Unclaimed Funds

Reasons for Unclaimed Funds

There are various reasons why funds and other assets go unclaimed:

  • A taxpayer may be owed a refund but moved without updating their address with the tax authority.
  • A customer of a bank that failed is unaware of a bank's closure or does not know who to contact to retrieve their funds.
  • A company may fold and employees have no information about the pension administrator and how to collect their pensions.
  • An account holder passes away and the financial institution isn't made aware of that fact.
  • Individuals may simply forget about their accounts.

The Dormancy Period

Unclaimed property is property that has gone unclaimed beyond adormancy period. The dormancy period is an amount of time after a financial institution reports an account or asset as inactive up to when the government deems that it's been abandoned. For most states, the dormancy period is three to five years.

When property is officially designated by the state asabandonedor unclaimed, it undergoes a process known as escheatment, where the state assumes ownership of that property until the rightful owner files a claim.

Potential for Taxes

Unclaimed property is not taxed while it is unclaimed. However, when it isreclaimed, the property may be officially recognized as taxable income, resulting in a tax bill for the claimant. Some unclaimed funds such as investments in a 401(k) or an IRA can be reclaimed tax-free.

Not all unclaimed funds originate with the government. Individuals may have unused money left on gift cards, positive account balances with banks and other financial institutions, and uncollected sales commissions with previous employers.

Also, beneficiaries of life insurance policies and other investments are common claimants to unclaimed funds.Businesses that hold on to unclaimed property typically are required legally to attempt to locate the asset owner. But if they're unsuccessful, they may be required to escheat it to a state or local government.

Types of unclaimed property include uncashed payroll checks, securities in inactive brokerage accounts, court funds, dividends, checking and savings accounts, and estate proceeds.

Unclaimed Funds Example

Consider an example in which an individual pays estimated federal taxes over the course of a year, files their taxes, and requests that any refund be mailed to their home address.

Before the refund is processed, they move and fail to disclose their new address to the tax authority.The refund is later processed and mailed to their last known address.

To deter fraud, correspondence and payments from tax authorities generally cannot be forwarded.So, the refund check is returned to the issuer and becomes unclaimed funds.

The onus now lies with the taxpayer to contact the government to reissue the check and send it to the correct address.

New York state has reported $18.4 billion in unclaimed money in 2023. Data also show that 70% of New York's unclaimed accounts hold less than $100 (but there is no limit to account size).

Thus far in 2023, Texas has returned $344 million to owners of previously unclaimed property. That amount involves about 200,000 claims (for an average claim amount of around $1,700).

Few claims are likely to match the $32.8 million in stock proceeds that a Connecticut resident claimed in 2012.

Verifying Unclaimed Funds

Federal and state governments offer a variety of ways to check for unclaimed funds. For example, the Internal Revenue Service (IRS) allows taxpayers to check the status of a federal refund online via the Where's My Refund portal and also offers a hotline that taxpayers can call.

However, because the online refund portal is easier and less expensive to maintain than phone systems, the IRS emphasizes that customers should only call if directed by the online portal.

The federal government does not yet have one specific system available for people to check for all unclaimed funds or property. It also does not maintain a centralized database to monitor unclaimed funds at a federal level, nor does it have information about unclaimed funds for each state.

Individuals and businesses looking for unclaimed funds will likely have to contact the appropriate state agencies where unclaimed funds or property may exist.

People can search various databases for funds that they may be able to reclaim, such as tax refunds, unpaid earnings, and money in bank accounts and investment accounts.

Potential for Scams

Unbeknownst to many individuals, most, if not all, government agencies are prohibited from contacting owners of unclaimed funds/assets by phone. Scammers understand this limitation and may attempt to defraud members of the public who aren't aware of it.

In some instances, such as with unclaimed pensions managed by the Pension Benefit Guaranty Corporation (PBGC), the names of individuals owed money are publicly listed. A scam artist may contact these individuals posing as a government employee and offer to help secure the unclaimed funds for a fee.

A key indicator that someone is attempting to defraud is their request for a fee, a social security number (SSN), or banking information.

What Happens If Money Is Unclaimed?

After a certain amount of time during which no one steps up to claim the money (e.g., in a bank account), it will be turned over to state authorities.

Do Banks Try to Contact Customers About Inactive Accounts?

Usually, they're required to do so. If that effort fails to locate an owner, a bank will contact the relevant state government's unclaimed property office.

How Long Before a Bank Account Is Considered Abandoned?

That depends on your state's escheatment laws and unclaimed property program. But normally, it's three to five years of inactivity.

The Bottom Line

Unclaimed funds are funds that have not been collected by their owners. They can be related to bank accounts, company pensions, wages, insurance policy funds, securities accounts, and more. After a certain number of years, unclaimed funds are turned over to the unclaimed property office in the state in which they are located.

Individuals can try to locate funds that they may be owed by contacting state offices and by searching various databases, including Missing Money and the National Association of Unclaimed Property Administrators.

What Are Unclaimed Funds? Definition, How They Work, and Example (2024)

FAQs

What Are Unclaimed Funds? Definition, How They Work, and Example? ›

Unclaimed funds are money and other assets whose rightful owner cannot be located. Unclaimed funds are typically turned over to the government after a specific period of time has passed. To claim the funds or assets, the designated owner or beneficiary must file a claim.

What is an example of found money? ›

Understanding Found Money

These funds include forgotten bank deposits, undisbursed retirement funds and even uncashed payroll checks. There are many different forms of unclaimed funds, such as bank accounts, retirement funds that remained with a previous employer; and old bonds.

What is the meaning of forgotten money? ›

Unclaimed funds are assets that have not been used for a long period of time or with unknown owners. These can include forgotten bank accounts, uncashed checks, dormant stocks, and other financial assets.

What is the meaning of unclaimed check? ›

Unclaimed checks are returned to an agency/department for which the payee cannot be located. Agency checks are checks issued from an agency/department's account that may have Revolving Fund, General Cash, or Trust Fund Cash. Agency checks have a one-year period of negotiability.

Is Missing Money legit? ›

Missingmoney.com is legit and can help you find potential unclaimed property that's owed to you. The site is free to use and is endorsed by the National Association of Unclaimed Property Administrators (NAPUA.) And it's helped people file $3+ billion in missing money claims last year.

Can you spend money you found? ›

The person from whom you take the money does not need to be nearby for it to be considered theft. They could have been gone for days, but the money is still theirs in the eyes of the law. So taking any money you find on the ground or at a checkout lane may be construed as theft.

How does found money work? ›

After one year or more, those assets are unclaimed and go to the state. That money is lawfully protected and kept by the state to be returned to the owner — rather than reverting back to the party who initially distributed the money. In most states, the money is generally held until the owner is found.

What is the legal term for lost money? ›

Compensatory damages are further categorized into special damages, which are economic losses such as loss of earnings, property damage and medical expenses, and general damages, which are non-economic damages such as pain and suffering and emotional distress.

How to find lost money at home? ›

Check usual and unusual places for your missing money. Look in the pockets of the clothes you wore when you last had the money. Check between couch cushions and on the floor. Check where you stash your keys at the end of the day.

What is the meaning of GREY money? ›

Grey money, on the other hand, refers to funds that are obtained through legal means but are not fully reported or taxed. It involves activities that operate in the "shadow economy" and may include under-the-table payments or unreported income . Dirty money is a broader term that encompasses both black and grey money.

How do I know if I have money from the government? ›

To check if you have unclaimed money, you'll want to search your name in your state database. In California, residents search through the state's Controller's Office with only their name, though you can also narrow down the search results with an address or city. Other states have similar online databases.

How do I find out what money is in my name? ›

Below are government agencies that have databases you can search for unclaimed money.
  1. Treasury Hunt: Unclaimed U.S. Securities and Payments.
  2. HUD/FHA Mortgage Insurance Refunds.
  3. Credit Union Unclaimed Shares.
  4. National Association of Unclaimed Property Administrators. ...
  5. U.S. Courts: Unclaimed Funds in Bankruptcy.
Dec 23, 2022

What is the best website to look for unclaimed money? ›

www.unclaimed.org is the website of the National Association of Unclaimed Property Administrators. This is a legitimate site created by state officials to help people search for funds that may belong to you or your relatives. Searches are free.

Is TreasuryDirect.gov legit? ›

TreasuryDirect.gov is the one and only place to electronically buy and redeem U.S. Savings Bonds. We also offer electronic sales and auctions of other U.S.-backed investments to the general public, financial professionals, and state and local governments.

How to find unclaimed money 5 free ways to track down your lost or forgotten assets? ›

How to find lost money
  1. The IRS website for any undeliverable tax refunds.
  2. The Pension Benefit Guaranty Corporation for unclaimed pension money.
  3. The U.S. Treasury Hunt for unclaimed savings bonds, registered Treasury notes or registered Treasury bonds.

Is Lost money Detectives legit? ›

In the Unclaimed Property Scam, asset locators or investigators contact individuals and offer to track down long-lost money. They demand an up-front fee or a percentage of the collected cash. Such services are unnecessary and may be illegal.

What does it mean when money found? ›

Found money is the amount of money which is rediscovered.

What are 3 money examples? ›

Economists differentiate among three different types of money: commodity money, fiat money, and bank money. Commodity money is a good whose value serves as the value of money. Gold coins are an example of commodity money.

What is the meaning of finding money? ›

Meaning of fining in English

to charge someone an amount of money as a punishment for not obeying a rule or law: Drivers who exceed the speed limit can expect to be fined heavily.

What is commonly found on money? ›

Salmonella species, Escherichia coli and S. aureus are commonly isolated from banknotes from food outlets. Laboratory simulations revealed that methicillin-resistant S. aureus can easily survive on coins, whereas E.

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