Escheat: Understanding Property Rights After Death

Escheat is a legal term that refers to what happens to property when the property's owner dies without any heirs. The concept of escheat allows property such as real estate or bank accounts to revert to the ownership of the government. If you’re wondering how to pronounce "escheat," it’s pronounced es-cheat, with the accent on the first syllable. While it may look like the "sch" in the middle is pronounced with a silent 'c,' the second syllable is pronounced exactly like the word "cheat."

Now that we’ve got the pronunciation down, let’s figure out what escheat really is.

Escheat: Definition And Explanation

Escheat is a legal term that goes back to English common law. Escheat deals with what happens to property if it’s unclaimed. In this case, it’s escheated, or returned back to the government. These escheat laws are in place to ensure that there’s a clear owner of property and that it doesn't remain in a limbo state.

Escheat is the right of the government to take or claim property where there isn’t a clear owner of it. Escheat is common for real estate that doesn’t have an heir and also for dormant bank accounts, securities, etc. Someone doesn’t have to die for their savings account balance to go into escheat. Simply keeping the account inactive will be enough. However, the bank must contact the individual and warn them.

An individual dying intestate is not the same as being heirless. When someone dies intestate, or without a will, heirs can often be found. Finding heirs through the probate process (generally children or close family members) will prevent the property from being escheated back to the government. Different states have different laws around escheatment, so be sure to consult the laws where you live to make sure you have the correct information.

Escheat Examples

One example of when escheatment can come into play is in the case of a real estate property owner dying without any heirs. After a period of time, if no heirs can be found, the ownership of the abandoned property can revert back to the government.

It's not just real estate that can be escheated – financial assets, like unclaimed checking or savings accounts, can also go into escheatment. If you close a bank account without withdrawing all the funds, it's possible for those funds to go into escheatment. Often this can happen in cases where a bank closes your account due to inactivity. Typically, rather than sending the funds from your account to your last known address, financial institutions will turn these unclaimed property funds over to your state or province.

Rent or utility deposits are another common scenario where personal property funds can be escheated. When you leave an apartment, landlords or utilities generally have a certain amount of time to refund your deposit. If they can't locate you, they may turn the funds over to the state's unclaimed funds department.

Escheat Reclamation: Is It Possible?

In many cases it’s possible to reclaim assets that have been escheated, although there’s often a statute of limitations. Many states have online registries of unclaimed assets, where you can search to find any of your funds that might be unclaimed. MissingMoney.com is one website where the departments of unclaimed property from several states and provinces have worked together. You can search on that one site for funds in over 40 states and provinces.

The procedure for reclaiming assets lost to escheat depends on the state where the funds are held. In most states, you’ll need to fill out a form and verify your identity. Watch out for scams – you’ll almost never need to pay money to claim your escheated funds. And if you have a claim to real estate in escheat, it’ll rarely be necessary to purchase that property in order to restore ownership.

The Bottom Line: Don’t Get Cheated By Escheat

Understanding how escheat works can help individuals avoid unfair and frustrating loss of property. As with most financial topics, knowledge is power, so you’ll want to continue to learn by exploring the Financial Learning Center.