The escheatment of banking property in South Dakota may increase as HB 1270 was signed into law by Governor Dennis Daugaard. The dormancy period for banking properties was reduced from five to three years, making South Dakota the 22nd state since 2007 to pass legislation reducing dormancy periods.
To recap, the following types of unclaimed property are affected by this legislation:
- Money Orders
- Any sum payable on a check, draft, or similar instrument
- All Banking Property
- All Life Insurance Property (from 4 years)
- All Securities Property Types
- All property held by a fiduciary including IRA property
- Gift certificates and credit memos
- Any tangible and intangible property held in a safe deposit box
- All other property not specifically addressed in the South Dakota’s unclaimed property law
As a result of legislation such as this, more and more banks are having to report and remit dormant accounts sooner. This trend of reduced dormancy periods is concerning because it directly impacts account owners and every bank’s bottom line. Banks have a shorter window of time to locate lost account owners and communicate with them to demonstrate activity and maintain compliance. Reconnecting with the owner — and having documented evidence of the communication — is the only way to stop the escheatment process and retain these dormant accounts.
The specific risk of the escheatment of bank accounts from unclaimed property enforcement has been steadily growing over the past decade. For example, in 2003 only 12 states had three-year dormancy periods for most banking property. Since that time, the numbers have shifted as 21 currently operate under a three-year period. Click here to view a state map of dormancy periods for banking properties. These states represent 53% percent of the U.S. population.
The law will go into effect on July 1, 2012, but will not affect the current reporting period ending June 30th. The Holder Reports due by November 1, 2012 will still use the current dormancy periods. All reports due in 2013 will follow the updated dormancy periods. Companies that have filed reports within the past two years will receive a new holder packet with a new dormancy table and forms prior to July 1st.
As this trend continues and more states propose reduced dormancy periods, we will continue to monitor and report on the individual pieces of legislation here on our blog, as well as in our Unclaimed Property Newsletter – Keanotes.