Escheatment

I just thought I would mention something regarding banking that I found rather interesting today.

I have several different accounts with a certain online broker.  Of those, IRA, checking, savings, and brokerage.

I tend to trade stocks rather often.  However, the checking and savings accounts I have there are really more of just a backup for my main bank account that I use for paying all my bills, direct deposit, etc.

I received a letter today telling me, because of the lack of activity, my savings and checking account were now considered inactive.  And further, if they remained that way for a period of time, the bank would be required to hand them over to the state.

The thing I found odd about all of this is that my brokerage account is being used constantly.  I just don't use the checking and savings very often.  

Apparently, regardless, the state could claim to these funds, and make me jump through hoops in order to get them back.

Anyway, it just seems rather odd to me as they can certainly see the activity with my other account.

To claim I abandoned 2 accounts, when there is massive activity on the brokerage account seems a little bit strange to me.

I am sure it's all legal.  It just doesn't seem to be using any common sense.

I am wondering if this would also be applied to any stocks I have with yet another brokerage.  I usually use that brokerage to buy stocks, and then I tend to just hold them for a long time.  So, there's very little activity there.  

Is this just a savings and checking account thing does anyone know?

I shouldn't think I'd be forced to buy or sell a stock or move $1 from one account to another every 6 months to be an account active.  

But actually, that's exactly what I had to do today for this one.  I moved $1 from savings to checking, and all is fine.  I then automated that process to once per month.  Problem solved.

However, it seems crazy.

It's likely that they are treated as separate accounts and the activity on one means nothing on the other.

It's likely that the letter was a courtesy to remind you to have even the smallest activity periodically.

I have the same setup with Scottrade: a trading account that I use often and a checking account from which I have not written a check in over a year and a half (although I do log on periodically to check the balance) but have not received such a letter.

One thing occurs to me. I have the two accounts linked which allows me to log on to one and switch to the other without logging out and logging back in. Both account numbers appear in a dropdown menu so I can just click back and forth.

Might be that being linked eliminates any inactivity letters.

Ameritrade has the same feature.

If you haven't linked the two accounts that way it might be a solution to the inactivity letter.

Actually, they are all linked together and show up on the same screen.

I log the same one account, and move money from one to another almost instantly.

It took 2 seconds to move money from checking to savings, and shows up in the same dropdown as the brokerage account and IRA as options.

It's been since January of this year that I moved money thru the savings from my other external bank, and then on to the brokerage account.

To walk away from looking at my etrade account and the realtime stock quotes, out to my mailbox, which then contains a letter saying because of inactivity, my accounts have been flagged "Inactive" seemed bizarre.  They suggested I log in to my account soon:)  Ok, I'm behind my desk, I am and have been  logged in every single day now, so now what?:-)

anyway.

superman1:

I received a letter today telling me, because of the lack of activity, my savings and checking account were now considered inactive.  And further, if they remained that way for a period of time, the bank would be required to hand them over to the state.

The thing I found odd about all of this is that my brokerage account is being used constantly.  I just don't use the checking and savings very often.  

It's really not odd at all. In financial institutions, often your various accounts are held separately and within varying departments.  Banks (as well as almost any business) are subject to unclaimed property rules.   The rules vary by state and the type of account.  Your various accounts (even within the same insitution) are spearate, and each has to deal with regulations related to each account.

You really don't need to jump through hoops.  If you have a valid claim for unclaimed property or if you wish to have an account remain active, it is not a lengthly process as long as you contact the appropriate agency.  Aslo be aware that if you use a nongovernmental agency to reclaim any funds, fees can be applied (limits vary by state law). 

You may (or may not) also wish to research the history of escheatment.  This is an area wherein many companies fall behind, but financial institutions tend to keep more up-to-date than other entities (such as former employers, landlords, etc.).

I can only say, the accounts are all linked together in an online.

What they do internally, I don't know.

But you are right, and I am sure, based on the way that things are, it is probably not odd.

It most certainly was a surprise to their customer (me:) ) however, since I'm logged into my account and doing something every single day.

>You really don't need to jump through hoops.  If you have a valid claim for unclaimed property or if you wish to >have an account remain active, it is not a lengthly process as long as you contact the appropriate agency.

Since I only just learned about this, I have no idea what the hoops might even be.  The only thing I know is what the person on the phone told me when I called.  So my knowledge is only as good as what he told me.  He claimed they sent this letters out alot.  He said there were cases he was aware of where people had waited up to 3 years to get their money back from the state.

Again, I know nothing more than what he told me.  

From what their letter indicates, it takes 24 months before they would actually report it to the state.

(and again, I'm only going by what their letter says, I have not as yet done any amount of real researching of this topic)

Thanks again!

superman1:

It most certainly was a surprise to their customer (me:) ) however, since I'm logged into my account and doing something every single day.

I'd be writing to the President of etrade for an explanation.

The "hoops" vary by state as well as the unclaimed property rules.  For goodness sake, I wish there was a uniforrm rule, but there is not one.   At this point in time, I do wish the rules would go undaddressed -- simply because our lawmakers need to focus on bigger tasks.  However, they should have done so in the "fat" times.

Etrade is based in NY, but that makes no difference to you.  What matters is the state of your recorded address.  From reading your postings, I know you have at least resided in MA and SC and don't know of any states in between.  The company needs to deal with the escheatment rules for your last-known address for the accounts.  Many, many, many, companies get this wrong.  I would especially not rely on a phone representative (no offense to any phone reps out there).  Personal opinion - I find this totally ridiculous - when dealing with major firms back when I was just an Audit Manager in the Big Four in the late nineties and early 2000s- it was a pain in the rear when it came up.

Even some law firms don't get it.  A few years ago, after the closing of a house, a real estate attorney's firm (that I respect for the most part) gave me a check for a few hundred dollars for the final settlement.  With travel, relocation, etc., it was "lost in the shuffle."  That firm's bookkeeper has continued to cancel a check, rewrite a new one (and deduct cancelation fees).  I know for a fact that this is an incorrect practice in the state I lived in at the time the original check was issued.  Not having a lot of time to deal with a few hundred dollars, I've not pursued this with them.  However, I do know -- withut a doubt -- that the practice goes against that state's unclaimed property laws.

The person you spoke with over the phone appears to be quite uniformed.   I wouldn't necessarily blame him or her since this matter varies so much by state (and phone reps are often uninformed).  However, please consider learning the regs in the state where your accounts are registered and go from there.

I wished to high heaven that these kind of laws were uniform, but they are not.  I would be pleased to see uniformity amongst states -- even though the laws would vary by type of amount owed (whether a payroll check, an account paybe due, an invesment, etc.), but at least uniformity would help out.

The account initially was set up in MA.

Do you know, is that the rules that are followed? 

or did you say it's from the state I currently reside in?

I know, in my other bank account, I was able to get a better interest rate because it was created in MA rather than SC.

It all seems rather nutty to me.  

But of course, I suppose I live in a virtual world:)

This was a few years ago, but it was a pretty big difference to me.

Thanks!

LG81:

What matters is the state of your recorded address.

Not exactly. It varies by state law, as you noted. But one thing applies in every circumstance: the abandoned property must be located in the state whose abandoned property laws are being applied, even if that condition is not expressly stated. It is that state's law that controls, since the state only has the authority to legislate regarding property located in that state. It lacks the power to legislate regarding property located outside that state. If you live in SC but have an account with a bank in MA, it will be MA law that applies, as that is where the property is located. The address of the account holder might also mattter under the applicable law, but you need to start with where the property is located.

A rule that focuses on the state where the property is located also makes sense from a practical point-of-view. Suppose that small town Bank A has customers located in several states because former residents of the town moved but left accounts open with the bank. Should the small bank have to know the abandoned property laws of all 50 states to deal with this kind of situation when it only operates in one state? That seems like an unreasonable burden to put on the bank, doesn't it?

For institutions that operate in more than one state, it can sometimes be difficult to determine exactly in what state the account is considered to be located. It may be that in that case the last known address of the owner would be significant in determining where the account is considered located.

Taxagent:

Not exactly. It varies by state law, as you noted. But one thing applies in every circumstance: the abandoned property must be located in the state whose abandoned property laws are being applied, even if that condition is not expressly stated. It is that state's law that controls, since the state only has the authority to legislate regarding property located in that state.

Hun - thanks for the dissertation.  You are only partially correct, but nice try.

LG81:

Hun - thanks for the dissertation.  You are only partially correct, but nice try.

Thanks for the condescending tone, LG. (And that's said with sarcasm in case you didn't catch that.)

If you believe I'm wrong, then please explain your reasoning. Do you disagree with the general principle that a state cannot legislate concerning property outside its jurisdiction? Or is your disagreement something else? I won't accept that I'm wrong just because YOU say so without pointing to any authority that backs it up.

http://abpweb.tre.state.ma.us/abp/abp_faq.htm

It it's an MA account, above is the link to the Treasurer's page that covers unclaimed property rules in MA (including a few tips on how to avoid having property you own from becoming abandoned).  The likely reason you're having this hassle although you have a single login for three accounts is that the institution is likely looking at it by account when completing annual filings.

Taxagent:

Thanks for the condescending tone, LG. (And that's said with sarcasm in case you didn't catch that.)

 I apologize if you interpreted it that way, but it was not intended to be condescending.  One needs to be careful when trying to infer tone to something that is written.  I remember when you became quite offended when PattyPa use the term "kids" when reminding a group of posters about a point they were missing.

Here's the part I respectfully agree with about your earlier post.  You stated:

"But one thing applies in every circumstance: the abandoned property must be located in the state whose abandoned laws are being applied, even if that condition is not expressly stated. It is that state's law that controls, since the state only has the authority to legislate regarding property located in that state."

Where the statement is incorrect is there are certain types of instruments that are actually covered by federal law (examples of types of instruments covered by federal law include travelers checks and money orders).

LG81:

 I apologize if you interpreted it that way, but it was not intended to be condescending.  One needs to be careful when trying to infer tone to something that is written. 

You're correct that tone can be misunderstood in things that are written. Let me explain my reaction. In my experience, any time a statement goes something like "you're wrong, but nice try" it comes across as condescending. I can't recall in the areas where I've lived where that kind of statement would ever be taken as something other than a veiled put-down. But I'll concede that perhaps in other places it would be regarded differently and accept that you did not mean it that way.

LG81:

Where the statement is incorrect is there are certain types of instruments that are actually covered by federal law (examples of types of instruments covered by federal law include travelers checks and money orders).

Covered by federal law in what respect? In general, federal law defers to state law when it comes to defining property and rights to property. And so far as I know, federal law does not have an abandoned property provision for these instruments that would require them to be turned over to the federal government, trumping state abandoned property laws. So, if a traveler's check is left abandoned in, say, a bank safety deposit box in State A, but the last known address of the box holder was a P.O. Box in State B, what federal law affects how the abandoned property would be handled? Does it go to the federal govenrment? If not, what federal law would override state law to determine which state gets the property? I've not come across a traveler's check or money order situation for abandoned property in practice and would appreciate it if you can refer me to the federal laws you have in mind. So far as I know, in general that traveler's check in the State A deposit box would be handled under the State A abandoned property laws.