Dormant Accounts Pose a Risk for Buy-and-Hold Investors

If you haven't been in contact with your investment firm, your state may be quicker to seize your account as abandoned property.

(Image credit: MarcoMarchi)

My mutual fund company sent a letter saying that if it doesn’t hear from me soon, it will turn over my account assets to the state. My address hasn’t changed. How could this happen? - G.P., Baltimore

Many states changed their abandoned-property laws and now take over accounts much earlier than they used to. This is a growing problem for buy-and-hold investors.In the past, financial institutions would turn over accounts to the state as abandoned if they hadn’t heard from you for seven years after mail to you had been returned as undeliverable. Now, many states can take over your account if a financial institution hasn’t heard from you for three or five years, even if your address hasn’t changed, says Tamara Salmon, associate general counsel for the Investment Company Institute, a mutual fund trade association (see ici.org/lost_property (opens in new tab) for details).

You can file an abandoned-property claim and get your money, but you may miss out on any gains or dividends after it was sold because the state can liquidate your assets. (Search your state’s database at unclaimed.org (opens in new tab) or missingmoney.com (opens in new tab).)

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Salmon advises contacting your financial institutions at least every three years to let them know an account is active. Even logging into your account online can count as activity at some firms. And respond to any letter like the one you received—after verifying that it’s legitimate.

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.