NEW YORK ( TheStreet) -- More than two dozen states -- from Alabama to Wisconsin -- are facing budget shortfalls of nearly $50 billion, and some have set their sights squarely on consumers' bank accounts to fill in those gaps.
Using unclaimed property laws, states have been able to secure more than $35 billion in "abandoned" assets, which range from gift cards that have never been spent to parents' college-savings accounts that have lain dormant for a few years. Less than one-third of that sum will be returned to the owners, who are largely unaware that their assets have been seized.
Unclaimed property is a big breadwinner for some states, like Delaware, where it was the third-largest revenue source in fiscal 2007. The state does not make an effort to locate account holders. California has also received much attention for lawsuits regarding its handling of such cases and famous denizens -- like Angelina Jolie, Google (GOOG) co-founder Sergey Brin and baseball star Willie Mays -- who have been ensnared in the unclaimed-property net, as the Wall Street Journal noted in an article earlier this year.
"Say your grandparents gave you $10,000 once and you just put it away," says Val Golin, an expert on escheatment (unclaimed property) at ING Direct. "Three years later, it could be gone. When you start to think through it, it really upsets you -- it's hard enough to keep saving your money instead of spending it."Some employees who received company stock in decades past and try to cash in on those assets today find that states sold them for a pittance many years ago. For instance, say an employee left Exxon (XOM) in 1985 with $5,000 in stock, and left it dormant in an account. The employee is getting ready to retire today, and looks up his account information, believing he now holds $66,150 in Exxon Mobil stock. He might find out he's entitled only to the amount the state liquidated the assets for in 1990: A mere $5,850. Laws vary from state to state, and by the type of account, though most accounts are considered "unclaimed" if they have not been accessed for a period of three to five years. Financial institutions are required to file any such property with states twice a year, in the fall and spring, but must first make an effort to locate owners. ING estimates that one out of eight Americans has unclaimed property. The online bank reached out to 40,000 customers this year through a new notification process, but problems arose because contact information was incorrect or out of date. ING was forced to turn over nearly 15,000 accounts worth $4 million as a result. "Banks are going to try to find you, but if we don't have the right number or email address, we can't," says Golin. ING suggests keeping a list of all account information -- from retirement plans and trusts to insurance policies, savings and brokerage accounts -- and giving a copy to a trusted family member or friend. It's also important to log into accounts and make small transactions or balance inquiries at least once a year. ING notes the importance of visiting safe-deposit boxes and using gift cards promptly, as well as updating contact information as necessary. Once property is claimed by the state, it can be returned to the owner, who must send information to prove ownership, fill out a claim form and wait for the check -- a process that comes with "a lot of bells and whistles" according to Golin, to get a sum that would have earned interest or appreciated had the government not stepped in. "It's just a hassle to get it back compared to not having to have it leave in the first place," Golin says.