Understanding the Escheatment Process: A Guide to Unclaimed Property

What is Escheatment?

Escheatment is the process of transferring abandoned or unclaimed property to the state when attempts to locate the property owner have been unsuccessful. It is the state government's right to take ownership of these assets when they have remained unclaimed for a specific period.

The escheatment process is governed by state unclaimed property laws and regulations. These laws vary by state, so businesses and financial institutions must be familiar with their responsibilities for identifying and reporting abandoned property in the states where their customers or employees reside.

Because escheatment is a complex process, it can create business risk and a steep administrative burden. Partnering with a disbursements expert helps businesses and financial institutions more efficiently return unclaimed funds to the rightful owners or complete the escheatment process quickly and compliantly when the owner cannot be found.

Types of Unclaimed Assets

Escheatable property can include various kinds of assets, which may vary depending on the jurisdiction. Examples include:

• Dormant bank accounts
• Cash or cash-equivalent payouts such as prepaid cards
• Unused gift cards or certificates
• Uncashed payroll checks
• Refunds due to overpayment of products and services
• Rental or utility deposits
• Insurance policy benefits
• Court funds

These and other assets may be left unclaimed if a person dies without naming heirs, intentionally abandons the property or simply forgets to spend funds such as a gift card or refund check.

Which Assets Do Not Have to Be Escheated?

Depending on state regulations, some types of unclaimed property may not be subject to escheatment. For instance, unused promotional payouts, like incentives, rewards and rebates, are usually exempt from escheatment laws. These payouts include specific terms and conditions, such as expiration dates that make it clear to consumers how long they have to spend their funds.

It's important to understand the unclaimed property rules in your state to determine whether payouts made by your organization are escheatable or not. Partnering with a disbursement solutions provider can simplify the process and help ensure your business remains compliant.

The Escheatment Process

Businesses, organizations and financial institutions, such as banks, are responsible for reporting unclaimed property. The process varies by state but typically includes the following steps:

Tracking Dormancy Periods

Each state specifies a dormancy period for unclaimed property, usually three to five years. This is the period of time during which assets remain unused. Payers are responsible for tracking assets to determine when they move into and exceed dormancy periods.

Performing Due Diligence

When an asset has exceeded its dormancy period, the payer must perform due diligence to reach the property owner. This responsibility includes contacting the owner at the last address on file and making a reasonable attempt to locate them.

Reporting Unclaimed Property

If the owner cannot be found, the property must be reported to the state. Usually, reports are filed once a year and have strict deadlines.

Transferring Unclaimed Assets to the State

All unclaimed assets must be transferred to the state, which takes ownership of the property. Typically, an asset is held for a specified period so the rightful owner can come forward. If it remains unclaimed, the escheated property is sold, with the proceeds going into state funds.

Minimizing the Burden of Unclaimed Property

Unclaimed property creates risk, expense and a steep administrative burden. To minimize these downsides, businesses and financial institutions can take steps to encourage consumers to claim and use their funds.

For instance, switching from checks to a digital solution helps keep payouts from being misplaced or forgotten. While checks can be lost or sent to the wrong address, digital payouts are delivered directly to the recipient's email address. They are easy to spend online, via a mobile device or in person using a digital wallet.

Since even small amounts of escheatable funds must be reported to the state, enticing consumers to spend their payouts regardless of size is key to reducing the escheatment burden. In Onbe + NRG's 2025 Payouts Landscape Report, 42% of respondents said they would consider abandoning $10 or less if claiming the funds proved time-consuming or confusing. By modernizing the payment experience, organizations can make the claiming process simpler and more convenient for their customers, decreasing the number of payouts that go unused.  

Best Practices for Compliance

According to the National Association of Unclaimed Property Administrators, up to 80% of businesses are not in full compliance with state escheatment laws. Escheatment can be complex and burdensome, and getting it wrong can lead to steep penalties, fines and even reputational damage. Consider these best practices when evaluating your processes:

• Track account activity. Businesses are responsible for identifying dormant accounts and starting the escheatment process within the timeframe required by the state. This requires proactively monitoring accounts to determine when the dormancy period has been exceeded.
• Maintain accurate records. Maintaining up-to-date records is essential for identifying unclaimed property, performing due diligence and fulfilling reporting obligations.
• Document your processes. Maintaining documentation of your activities, such as due diligence efforts, is key in the event your business is audited.
• Stay informed. State laws and regulations may change regularly. Keeping up with legislative developments can help ensure your business remains compliant.
• Partner with the experts. A third-party provider of payout and escheatment solutions can help reduce your business risk and administrative burden. Onbe assumes 100% of the liability for handling unclaimed property, freeing up your team to focus on their core activities.

Conclusion

Escheatment is a critical process for managing unclaimed property and, when possible, reuniting property owners with their assets. Organizations must comply with state unclaimed property laws and regulations to avoid penalties and ensure that property owners are treated fairly.

Because the escheatment process can be burdensome and carries the risk of accidental non-compliance, many businesses benefit from partnering with a payout solutions provider like Onbe. We handle the complexity of escheatment on your behalf—from monitoring payment activity and identifying dormant accounts to keeping up with evolving regulations in the states where you do business. To learn more about our services, talk to our experts.