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Handling
Abandoned
Property |
"Escheatment" is one of those legal terms you may not know much about. But be it could cost your corporation substantial interest, fines or penalties.
The word means turning over to your state any abandoned, lost or unclaimed property, both tangible and intangible. This property is often transferred to the government because a person died without a will, legal heirs or claimants.
The principle falls under unclaimed property laws that most states have been adopted in most states. They are based on the Uniform Unclaimed Property Act of 1995, which was passed into law to rectify conflicting state legislation. The 1995 Act reinforces and clarifies the intentions of earlier acts where the state does not take legal title to the forfeited property but only acts as custodian and holds the property for the legal owners in perpetuity.
If your corporation is required to comply with the laws, review your accounts annually to determine whether you are holding any abandoned property. Every state has its own calculation of the time that must pass before property is considered abandoned or unclaimed. The 1995 Act, for example, says that the contents of safe deposit boxes are considered abandoned five years after the last rental period expired.
The courts have given states sound legal footing in this area, upholding states' rights to demand unclaimed property. In one case, the court upheld the state's enforcement of custody not only in its own court but in the courts of other jurisdictions as well. (Pennsylvania v. Kervick, 60 N.J. 289, 288 A.2d 289 (1972))
Companies that haven't complied with state escheat laws have been subject to major criminal charges and civil fines. Bankers Trust Co., for example, posted $19.1 million of unclaimed checks and other credits due to customers as income to enhance its financial statements. In a March 1999 plea settlement, Bankers was ordered to pay $60 million to the federal government and $3.5 million to New York state. Moreover, the federal government won criminal indictments against three Bankers executives.
Consult with your attorney to make sure you're complying with the law. Some states may, because of ignorance or apathy on the part of companies, offer amnesty to encourage businesses to comply with the law.
This article is provided as a service by: L.S. Sherman Litigation Consulting.
LSSLC is a group of complex litigation specialists helping attorneys prepare successful complex litigation through the management of detailed technical information and engagement of experienced testifying experts of unsurpassed quality.
Contact Linda Sherman: 610-642-7755
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LSSLC, LLC provides the information in this newsletter for general guidance only, and does not constitute the provision of legal advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation.
The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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