States With Quick Turnaround Times
The definition of escheatment can be difficult to ascertain, especially in a court of law. While many states have certain escheatment periods, it can be difficult to define a dormant or inactive account in a black-and-white manner. For example, Alabama, Arizona, Arkansas, and California have some of the quickest turnaround times when it comes to escheatment. This means that if you have a dormant/inactive bank account, it will be handed over to the state. The period for a bank account is as low as 3 years, and checks and salaries can be escheated in as little as a year.
The issue is whether this is an efficient way to do things. For example, it is quite common for someone to leave an account to become inactive if they have forgotten about it, if they are outside of the country, or if the person with whom the fiduciary duty was entrusted did not deliver on their promise. This, of course, causes a huge issue if, for example, the financial planner for that individual works directly for the financial institution which is reporting the escheated account.
States With Longer Turnaround Times
Fortunately, there are states with longer periods of dormancy or inactivity that may actually reflect a situation much better. North Carolina has some of the longest turnaround periods, with checks and drafts being left for as long as 7 years before they are placed into "escheated" status. It is a good reminder that this can only occur if the account or draft is dormant or inactive for this consecutive period. If the account-holder comes along every few years to deposit, withdraw or update information, the clock resets. Some members who coordinate legislation may feel this is a more fair approach to escheating funds rather than shortening the time period between claiming or garnishment.
Two states, in particular, are of note, Mississippi and Missouri. They have a long period before escheating, which is 5 years for bank accounts and checks/drafts. What is interesting is that they do not have anything specified in their legislature regarding wages and salaries. While most states stop the country at one year, a minority of states allow up to three years. In these two states, there are no current specifications as to what can happen to someone's salary after an indeterminate amount of time. This can cause huge legal issues if they are escheated, and usually need the attention of a legal professional.
Why Escheatment Was Put Into Place
Unclaimed property does not benefit anyone. If the funds do not belong to someone specifically, or if they do not make the effort to show that the funds are useful in their possession, money has long gone and sat in accounts, becoming lost in the economic landscape. This presents huge issues, including taking money out of circulation without the intent of the state or federal reserve. If escheatment was not put into place, the reserve may need to adjust interest rates or print more money into circulation to maintain a healthy economy.