Prerequisites
- An uncashed-check ledger, start it before you issue your first check
- A credit balance process, see Resolve credit balances
- Knowledge of which states you have property owners in
What counts as unclaimed property
Which state gets it
Governed by longstanding priority rules derived from US Supreme Court decisions on interstate escheat:1- The state of the owner’s last known address in your records
- If no address, or the address state has no applicable law, the holder’s state of incorporation
- Property is reported to the patient’s state, not necessarily yours
- A multi-state group reports to multiple states
- Address hygiene matters — a missing or wrong address changes which state gets the property, and defaults it to the entity’s state of incorporation
- Each PC is a separate holder with its own reporting obligation
The pipeline
Steps
1
Keep the uncashed-check ledger from day one
This is the whole ballgame. Record every check: number, amount, payee, payee’s last known address, issue date, entity, and clear date.Reconstructing this in year three, across multiple entities, from bank statements, is exactly the work a state unclaimed property audit will make you do, and audits routinely look back a decade or more. Starting the ledger costs nothing; reconstructing it costs weeks.
2
Reconcile it monthly
Match issued checks against cleared items. Anything outstanding past the stale date printed on your check stock, commonly 90 to 180 days, moves to the due diligence queue.
3
Attempt re-contact before the stale date
Cheaper and better for everyone than escheatment. Call, email, or text. Verify the address. Reissue if they simply never received it.
4
Send the due diligence letter
Most states require a written attempt to contact the owner before reporting, within a specified window before the reporting deadline, and often with prescribed content.Send it to the last known address, retain a copy and proof of mailing, and record the date. States also frequently set a dollar threshold below which due diligence isn’t required.
5
Track the dormancy period
The dormancy period is the time the property must remain unclaimed before it must be reported. It varies by state and by property type — uncashed payroll frequently has a shorter period than other property.See Unclaimed property by state for the framework, and confirm against each state’s current statute.
6
Report and remit
Most states use a common reporting cycle with an annual deadline. Reports are filed electronically in a standard format, with the property remitted alongside.File per holder entity, per state. Each PC files its own.
7
Retain records after remitting
States typically require retention for a period after reporting, and an owner who later comes forward is directed to the state, but you may need to evidence what you reported.
Voluntary disclosure
If you discover you have years of unreported property, which is common when a group first looks, most states offer a voluntary disclosure agreement program: you come forward, report the backlog, and typically receive penalty and interest relief. Voluntary disclosure is materially better than being audited. Unclaimed property audits are frequently conducted by contingency-fee third-party auditors, look back many years, and use estimation where records are incomplete, which is why the ledger matters so much. If you have a backlog, take it to counsel and consider voluntary disclosure before an audit letter arrives.Multi-entity considerations
This is one of the quieter ways multi-entity overhead compounds, and one of the more common findings in diligence.
Prevent it
The best escheatment process is a small one:- Refund promptly. Weekly credit balance review, resolution within 30 days.
- Refund to the original payment method wherever possible — card refunds don’t go stale.
- Verify addresses before mailing a check.
- Follow up on uncashed checks at 30 and 60 days, before they go stale.
- Collect good contact information at registration and keep it current.
Verify it worked
- Uncashed-check ledger maintained from the first check, per entity
- Reconciled monthly
- Re-contact attempted before the stale date
- Due diligence letters sent per state requirements, with proof retained
- Dormancy periods tracked per state per property type
- Reports filed per holder entity, per state, by the deadline
- Aged credit balances included, not just issued checks
- Records retained after remitting
- Backlog, if any, discussed with counsel regarding voluntary disclosure
Common failure modes
Sources
- Interstate priority rules derive from Texas v. New Jersey, 379 U.S. 674 (1965), and subsequent cases. State unclaimed property administrators are indexed by the National Association of Unclaimed Property Administrators at unclaimed.org.