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What is Abandoned Property?

Most people think of an abandoned car or even a house when abandoned property is mentioned, but it also applies to investment accounts.

If physical property such as a car is left for a long enough time in a public space or privately owned space such as a storage building, the property can be deemed abandoned and the person who discovers it can become the new owner.

Through a process called escheatment, investment accounts, savings accounts, bank CDs, and employee 401(k) accounts can all become assets of the state if they are determined to be abandoned.

A broker-dealer firm, employer, or bank must make all reasonable effort to contact the owner of the account, and if it has been more than 5 years since the owner was in contact with the firm, employer, or bank, the account will be liquidated and become an asset of the state in which the account was held.

There are several websites whose purpose is to help the account owner locate the appropriate contact within a state government who may be able to settle the account for the owner. The state will ask for proof of identity and then pay the account owner the amount which was in the account at the time of escheatment.

Some banks and broker-dealers also charge an inactive account fee, perhaps as a method of encouraging the account owner to keep up with their assets. After all, if the client forgets about them, the bank or broker-dealer will have to give the assets to the state.

Keywords: broker-dealers, escheatment, abandoned 401(k), inactive account, abandoned property,