Found Money
States are sitting on at least $22 billion of unclaimed property. How much of it is yours?
By Mary Beth Franklin, Senior Editor
From Kiplinger's Personal Finance magazine, August 2004
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Joseph Sataloff of Philadelphia was puzzled. He had tried to check when a tax-exempt bond he knew he'd bought years earlier was scheduled to mature, but his bank could find no record of the transaction. Sataloff, 85, a nationally renowned ear, nose and throat specialist, didn't remember cashing in the bond. In fact, he still had a certificate that proved he owned it. The mystery was solved this past spring when he received a phone call from Pennsylvania's Bureau of Unclaimed Property. The bond had been called in 1995, 13 years before it was due to mature. Because Sataloff had failed to respond to notices about the bond, $20,400 had ultimately found its way to the commonwealth's treasury, where it was waiting to be claimed by its rightful owner.
"Everyone wants to win the lottery," says an exuberant Sataloff. "I feel as if I just did!"
Like millions of Americans, Sataloff made a crucial mistake: When he moved to a new address, he failed to notify all the financial institutions where he had accounts. Filling out a change-of-address form with the post office isn't good enough because the forwarding service expires after one year. Also, because of privacy laws, some financial documents cannot be forwarded.
A change of address isn't the only obstacle to keeping track of your money. Failing to cash a dividend check or two, make a deposit or withdrawal from a bank account at least once a year, or respond to correspondence from a mutual fund company can launch your property on a journey to your state's treasury. An account is often considered abandoned if there has been no activity for a year or longer. After two failed attempts to contact the owner, financial institutions must turn over property to the state for safekeeping following a dormancy period that ranges from one to seven years, depending on the state and the type of property.
This is far from unusual. In 2003, state coffers held more than $22 billion in unclaimed assets, including lost bank accounts, misplaced bonds and securities, uncashed dividend checks, uncollected utility deposits and unclaimed life-insurance benefits, according to the National Association of Unclaimed Property Administrators (NAUPA). Two states -- California and New York -- control nearly half of the loot.
Over the past few years, state lawmakers and budget officers, scrambling to find new sources of revenue, have turned a keen eye on this potential windfall. Since 2000, nearly half of the states have clarified what qualifies as unclaimed property and accelerated their timetables for moving such assets into state treasuries, says Lynden Lyman, managing director of Unclaimed Property Clearinghouse, of Boston, which works with states to identify unclaimed assets.
State officials claim it's a win-win situation for property owners and taxpayers. The earlier the states get hold of the assets (a process known as escheating), the faster they can start to look for the rightful owners. In reality, only about a third of owners are ever found. The rest of the assets are "retained forever, and states will use the revenue to offset their budget problems," says Steve Larson, deputy treasurer of Iowa and a regional vice-president of NAUPA. Over the past year, some states, including Iowa, Maine, Massachusetts and Pennsylvania, have doubled or even tripled the amount of unclaimed assets they're able to collect as a result of newly shortened dormancy periods. For savvy consumers, this could mean a bonanza of lost property just waiting to be found.
The feeling is mutual
One of the newest and largest sources of unclaimed assets -- insurance-company shares -- is just starting to flow into state coffers. Since 2000, more than a dozen major insurers have converted from privately held companies owned by policyholders to publicly traded corporations. In the process, which is known as demutualization, insurers compensate policyholders with stock or cash based on the size of their policies and how long they have owned them. For example, when MetLife demutualized in 2000, it announced that it couldn't find the rightful owners of 60 million shares, worth more than $2 billion. That money is now headed to the appropriate state treasuries, based on policyholders' last known addresses.
Massachusetts, one of the first states to accelerate the collection of unclaimed insurance-company shares, placed multiple-page ads in local newspapers last fall that listed the names of lost policyholders. Joan Jackson, 67, found two listings for her mother, who had died 18 years earlier. As her heir, Jackson collected more than $1,000 from two Prudential policies.
Owners are entitled to the value of the shares at the time the states sell them, but not to any subsequent appreciation. Some states hold on to the shares for a year or more; others cash them immediately. To check out whether an insurance company with which you've done business may be affected, visit www.demutualization-claims.com.
Finders' fees
Thanks to an aggressive program designed by the Commonwealth of Pennsylvania to reunite owners with missing assets, Sataloff got his money back free. But all owners of missing property are not so lucky. People often receive letters from private companies offering to track down missing property for fees of up to 35% of the overall assets.
Many locators are legitimate and work with major corporations to find lost shareholders before their assets are turned over to the state. But some less scrupulous firms send random letters suggesting that they have found unclaimed assets in a person's name and asking for a finder's fee up front. Sometimes all these firms have to offer is a list of names from state unclaimed-assets bureaus -- information that anyone can obtain. "We would advise people to be wary of any company that asks for money up front," says Steve Schell of the Pennsylvania treasurer's office. "That's a sure sign of a scam." Legitimate locators collect a fee only after the property is delivered. When in doubt, contact your state's department of unclaimed assets.
Although numerous Web sites charge a fee to search lost-property databases, don't waste your money. Instead, check the free site sanctioned by NAUPA (www.missingmoney.com). It provides links to the unclaimed-assets offices in all 50 states and the District of Columbia. If you want to cast a wider net, visit Unclaimedassets.com, a Web site run by Mark Tofal, author of Unclaimed Assets: Money the Government Owes You! In addition to tips on how to track down demutualized insurance-company shares, the site explains where to look for hundreds of billions of dollars' worth of unclaimed assets held by the federal government, including uncashed social security checks, unclaimed tax refunds and lost pensions. Tofal will conduct searches of specific databases on your behalf for a fee, which ranges from $10 to $45.
It's easy to search for lost assets online. Because the owner's last known address determines where unclaimed assets are sent, focus on states where you have lived in the past. When there is no known address, abandoned assets go to the state in which the corporation is based, which explains why the tiny state of Delaware ranks among the top states in unclaimed assets with about $1.2 billion in its coffers.
Paying the piper
Not everyone objects to paying a fee to find lost money, figuring that 75% of something is better than 100% of nothing. Sue Peterson of Soperton, Ga., says she didn't mind handing over $6,000 to Keane, a locator company in West Conshohocken, Pa., in exchange for finding Kroger stock worth more than $19,000 that had belonged to her mother, who died in 1991. Peterson kept half of the remaining $12,755 and divided the rest among her deceased sister's three children.
"There is no way I could have done this on my own," says Peterson, 74, who handled all of her mother's finances before she died. The missing Kroger stock certificates were not among her mother's papers. "They did all the work and all the telephoning," she explains. "All I had to do was give them the authorization to replace the stock certificates and sell the shares."
If you receive a letter about lost assets, you have two choices. You can ignore it and assume that the property will eventually land in your state's unclaimed-assets bureau and you'll then collect on it free. But that process could take years. Or you could try to negotiate a lower finder's fee. (Many states cap finders' fees at 15%, but the cap applies only to assets under the state's control. There is no limit on fees charged by locators who work with companies to find lost shareholders before securities are turned over to the state.)
Grahame Dowling of New South Wales, Australia, cut a deal with a locator company for the property of an aunt who lived in the U.S. before her death. Dowling negotiated the finder's fee down from 35% to 10%, saving $27,000 on a lost mutual fund account valued at more than $100,000.
--Reporter: Christine M. Varner