Keane's Unclaimed Property Blog

Unclaimed Property Glossary: Commonly Used Escheat Terminology

If you are tasked with unclaimed property reporting for your company or are new to unclaimed property in general, you will find that the terminology related to the unclaimed property reporting process can be daunting to understand.

We have recently put together a glossary capturing frequently used terminology by unclaimed property professionals.

Below is a glossary of some of the most commonly used unclaimed property terms when completing the escheat reporting process:

 


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Abandoned or Unclaimed Property

Abandoned or Unclaimed property is any unfulfilled financial obligation generated during the course of an organization’s daily operations that remains due and owing to another party (owner).

If these obligations remain outstanding beyond a pre-determined time period, the property is required to be escheated or transferred to the state to be held in a custodial nature until the owner or heir comes forward to claim the asset.

Activity

Prevalent within the banking and securities sectors, activity is any action performed by an owner to indicate an interest in that property. The dormancy period restarts after each qualified instance of owner-generated activity. What constitutes activity as qualified often differs depending on state laws.

Audit

States utilize unclaimed property audits as a measure of compliance with their unclaimed property laws. States often utilize third party firms to conduct these audits or examinations. Third-party auditors are often compensated on a contingency fee based on the amount of past-due property they identify that is ultimately remitted to the state(s).

Custodian

After property escheats to the state or jurisdiction where the property is owed, that state serves as a custodian and holds the unclaimed or abandoned property until it is claimed by the rightful owner.

Cut-Off Date

The cut-off date is the date upon which dormancy period is satisfied, resulting in the property being identified on the next unclaimed property report.

Domicile

A domicile is the holder’s state of Incorporation or state of principal place of business if not a corporation.

Dormancy Period

A dormancy period is the period of time that a property must remain outstanding, without any qualified owner activity, before it is considered reportable to the state.

Once the dormancy period elapses, that property must be remitted to the state unless the owner of that property makes claim for it during the due diligence period.

Due Diligence

Due Diligence is the state-mandated outreach process that holders must perform by sending letters to unclaimed property owners in an attempt to notify them and allow them to indicate interest in, or claim their outstanding property.

If an owner is not found as a result of the due diligence process then that property, by law, must be reported and ultimately escheated.

Due Diligence Minimum

A due diligence minimum is the dollar limit or threshold above which would require a state-mandated due diligence letter be sent to an owner.

Escheat/Escheatment

Actually slang but commonly refers to the act of transferring or remitting unclaimed or abandoned property to a state jurisdiction of the owner’s last known address.

Once the state possesses that property, it then becomes the custodian until a rightful owner makes a claim.

Holder

The company or organization who owes the debt of the unclaimed property to the owner.

Intangible Property

Intangible property is property that does not take a physical form. This property is usually in the form of securities (equities, debt or alternatives) that show ownership or interest in a company.

Last Activity Date

The last activity date is the date of the last recorded owner activity on record by a holder.

Last Known Address

The owner’s last recorded address according to a holder’s books and records. This address is used when determining outreach efforts and the state or jurisdiction to which the unclaimed property is to be reported or escheated.

NAUPA Property Type Codes

A set of codes developed by the National Association of Unclaimed Property Administrators to be used when submitting property reports. The set of codes identify the types of property being submitted on unclaimed property reports which are accepted by most states and jurisdictions.

Negative Report (Zero Value Report)

A negative report, otherwise known as a zero value report, is a report that is filed when no property is held by a holder is due for escheatment.

Owner

The individual or legal entity to whom the unclaimed or abandoned property is owed.

Priority Rules

A set of common law rules derived from US Supreme Court case law that determines disputes between states contesting the right to take custody of unclaimed property. Typically, first priority is awarded to the state of the owner’s last known address.

Record Retention

Record retention is the time period that a holder is required to hold on to records of unclaimed property in the post report timeframe.

As a general best practice for holders, it is wise to retain records for a minimum of 10 years, or longer if the records are electronic.

Remittance

Remittance is the act of transferring property over to the state or jurisdiction along with the final state report.

Reporting Deadline

The day that unclaimed property must be reported and remitted to the state.

Uniform Unclaimed Property Act

Generally accepted model laws that serve as reference for state legislatures when creating, modifying or enhancing current state unclaimed property statutes.  There have been several version for unclaimed property, the last being in 2016.

Voluntary Disclosure Agreements (VDA)

State-sponsored programs that allow holders to willingly come forward and report past-due property, usually in exchange for a waiver of fines, interest and penalties normally associated with overdue filings.

Talk the Talk, now Walk the Walk.

Now that you’ve mastered the terminology, keep expanding your unclaimed property education. Unclaimed property compliance isn’t something that can be learned overnight. It’s a complex and nuanced process that takes continuous training and education.

That’s why we created an Unclaimed Property Resource Library designed to provide you with helpful information that will assist you throughout the escheat reporting process.

If you are in need of immediate assistance with your unclaimed property reporting process, please feel free to reach out to us.

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Compliance, Unclaimed Property Reporting


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