I am sure we have all experienced the delight when finding a ‘lost’ $20 in our coat pocket. This type of surprise can potentially happen on a much bigger scale when you find out that you are due unclaimed property. Unclaimed property generally refers to accounts in financial institutions and companies that have had no activity or contact with the owner for 1 year or more. Unclaimed property can range from a few dollars left in checking and savings accounts to hundreds or even thousands in customer overpayments, security deposits and royalty payments.
On one level it seems hard to believe that someone could ‘forget’ about money. Just as I am always amazed with the stories of unclaimed luggage at the airport, I am just as curious about forgotten money. I digress. On another level, as a CPA who has seen many different financial situations and levels of record keeping, it is easy to see how this can happen. Particularly with large and dynamic family situations, multiple business relationships etc. it can be difficult to keep track of everything.
What if there are unclaimed money?
If your financial matters are on the complex side and record keeping hasn’t always been a strong suit, you might want to investigate the possibility that some unclaimed money is owed to you. I have personally heard of two unclaimed money stories recently; one with a positive outcome and the other – well let’s just say it has been a year and the money has still not arrived.
So how would you go about finding this ‘lost money’? You can do the research yourself. Each state has a website for its unclaimed property department. For Arizona it is HTTPS://www.azunclaimed.gov/. If you’ve lived in a number of different states, there is also a website developed by the National Association of Unclaimed Property Administrators (NAUPA) that provides links to each state’s search site.
If you don’t want to spend the time yourself, there are also businesses in the business of uncovering unclaimed property and tracking down the rightful owners. They can save you time and effort but of course, there is a fee. A typical ‘finder’s fee’ is usually a percentage of the total. Some states limit the fee to 10 percent and I’ve heard of others as high as 30%. The majority of these finder firms are legitimate but, as you might imagine, there are many unclaimed property scams so you should proceed with caution and do your research. Before signing any contract it is highly recommended that you contact the state unclaimed property office for more information.
What are the chances you have unclaimed property and of actually being able to claim it? Well, if you have patience, it could pay off. In the positive example mentioned above, it took over 6 months and numerous calls but in the end, this lucky person ‘found’ over $15,000. In the end, it seems this was not a bad return on the owner’s time. However, it seems this was an above average find. According to NAUPA, the average amount reclaimed is $892. Still, I don’t know about you but that’s enough for me to give it some serious consideration.
If you are fortunate enough to re-claim unclaimed property, don’t forget that you may need to pay taxes. The primary factor used to determine whether or not you will owe taxes on the unclaimed funds is the original source of those funds. In general, the money will be taxable only if it came from a taxable source. For example, an unclaimed life insurance payout is likely not subject to taxation as life insurance benefits rarely are. On the other hand, an unclaimed inheritance will most likely be subject to taxes. Another factor is whether or not the money was taxed before you ‘found’ it.
If you may have unclaimed property owed to you, remember that our tax law is complex and it would be prudent to consult a tax professional during the process. If you have questions at all about the tax status of unclaimed funds you plan to collect, please give me a call. And good luck!