What is Presumption of Abandonment?

The presumption of abandonment is a legal concept whereby property is considered abandoned after a specific period of inactivity or lack of communication from the apparent owner.

For individuals, recognizing the presumption of abandonment can prevent the loss of property. For businesses and financial institutions, it ensures compliance with state laws and avoids potential penalties.

Abandoned property refers to accounts or financial assets that have experienced no owner activity for a significant period. Common examples include uncashed payroll checks, inactive investment accounts and dormant bank accounts. Other examples are unredeemed money orders, gift cards in some states, contents of safe deposit boxes and life insurance policies.

Relevant statutes and common law principles

Relevant statutes and common law principles around abandoned property vary across states, but key elements include dormancy periods and escheatment–the process of transferring unclaimed property to the state. In practice, the statute of limitations can range from seven to 10 years, or extend up to 12 years for certain securities. For unclaimed bank accounts, dormancy periods commonly range from three to five years. For example, a bank account may be presumed abandoned if there has been no activity for three years, as observed in many states. Uncashed checks might have a shorter dormancy period, often one to five years.

Gift certificates are unique because time limits for their presumption of abandonment can depend on whether the certificate can be classified as cash equivalent. Some states might consider a gift certificate abandoned after three years.

State laws often require businesses to perform due diligence by attempting to contact the owner before transferring the property. For example, after the dormancy period, abandoned property is managed by state treasuries, which list these items on official state websites where owners or heirs can search for and claim their lost assets. This process ensures that unclaimed property is properly managed and gives rightful owners an opportunity to reclaim what is theirs.

Delaware, Maine, New Hampshire and Nebraska have the shortest period for renters to reclaim abandoned property at just seven days. Most states provide a more common timeframe of 10 to 30 days. Texas and Vermont extend this period to 60 days, while Indiana allows up to 90 days. In contrast, Rhode Island mandates that landlords retain abandoned property for a “reasonable” time without defining a specific duration.

Reporting and holding abandoned property

The responsibilities for reporting and holding abandoned property are detailed and precise. Financial institutions, for instance, must attempt to contact the account holder through letters, and publish names in local newspapers before transferring funds to the state. Each state’s unclaimed property program handles the subsequent steps.

Businesses holding property that remains unclaimed are subject to varied reporting and delivery requirements. These stipulations often include penalties for non-compliance. For example, state laws can impose stiff penalties on entities failing to adhere to unclaimed property statutes, emphasizing the gravity of timely reporting and delivery. In extreme cases, persistent non-compliance could result in legal action from state authorities.

Moreover, improper handling of abandoned property can also expose holders to civil litigation from the original property owners.

To reclaim property presumed abandoned, owners must present evidence demonstrating ongoing ownership or intent to reclaim the property. Owners need to provide clear evidence of activity, such as recorded transactions, communication with the holder of the property, or other significant interactions demonstrating ownership. For instance, for a dormant bank account, providing transaction records or recent deposits can suffice. For uncashed checks, contacting the issuing institution to verify ownership and reissue the check proves beneficial.

Special cases

1. Matrimonial law: Within the legal framework of divorce or separation, determinations of abandoned property can affect the division of assets. Items left behind or unused can be subject to specific rulings based on the couple’s intentions and state laws.
2. Tenant property abandonment: Property left by a tenant after vacating a rental can be presumed abandoned after a specific timeframe, which varies from one week to one year, based on state regulations. Depending on state laws, landlords may dispose of, sell or be required to turn over the remaining items to the state or county.
3. Child custody issues: In cases involving child custody, abandoned property scenarios can arise when a parent leaves assets meant for the child’s benefit. The treatment of such property is guided by family law principles and relevant state statutes.

A financial advisor can assist you in navigating your state-specific laws regarding abandoned property in order to empower you to make informed decisions about investments, savings, budget, insurance and tax strategies. Ultimately, this may help you avoid penalties and ensure compliance with reporting obligations. Seeking legal advice is equally important. There’s a substantial difference between lost, mislaid and abandoned property, and understanding these distinctions can help protect your rights and interests. Legal doctrines and principles can also support you in rebutting presumptive abandonment and claiming ownership with clear and convincing evidence.