What Happens to Unclaimed Inheritances in California?

What Is Unclaimed Inheritance and Escheatment in California?

An unclaimed inheritance refers to money, property, or other assets left by a deceased person that no rightful heir or beneficiary has claimed. This could include bank accounts, stocks, safe deposit box contents, or even real estate. Escheatment is the legal procedure by which these unclaimed assets are returned to the state. The California Code of Civil Procedure, specifically sections 1300 through 1582, outlines the rules governing this process. 

The State Controller’s Role in Managing Unclaimed Property 

In California, the State Controller’s Office (SCO) plays a central role in handling unclaimed property. This office acts as the custodian for millions of pieces of property that have been reported as unclaimed by various entities, like banks, corporations, and insurance companies. When assets are escheated, they are transferred to the SCO. The SCO then holds these assets and works to connect them with their rightful owners. They maintain a public database where people can search for unclaimed property. This system is designed to provide transparency and a clear path for individuals to reclaim what is theirs, even years after it has been turned over to the state. 

How Do Assets Become Unclaimed and Escheated?

Before assets can be considered “unclaimed” and reported to the state, they typically undergo a dormancy period. This refers to a specific period of inactivity on an account or lack of contact with the owner. The length of the dormancy period varies depending on the type of asset. For instance, a savings account may become dormant after three years of inactivity, while a payroll check may be considered unclaimed if left uncashed for one year. Once an asset reaches its dormancy period, the holder (like a bank or a business) must make a good-faith effort to contact the owner. If these efforts fail, the holder is then legally required to report the unclaimed property to the California State Controller’s Office. This reporting process happens annually, typically around November 1st for property that became dormant by June 30th of that year.

The Role of Executors and Administrators in Probate

A diligent executor or administrator will conduct thorough searches for heirs, utilizing available records and, in some cases, professional heir search services. If, after all reasonable efforts, an heir cannot be located or fails to claim their share during the probate process, the court may order that share to be deposited with the county treasurer or the State Controller. California Probate Code sections, such as 11604, address these situations, outlining procedures for such deposits and how long the funds are held before potentially escheating to the state. 

What Types of Assets Are Subject to Escheatment?

Many different types of financial assets can end up in the state’s unclaimed property database. These often include:

• Bank Accounts: Savings accounts, checking accounts, and money market accounts that show no activity for a set period, typically three years.
• Stocks, Bonds, and Mutual Funds: Uncashed dividends, interest payments, or the underlying shares themselves, especially if there has been no owner contact for several years.
• Uncashed Checks: This category encompasses a wide range of payments, including payroll checks, vendor payments, utility company refunds, insurance claim checks, and cashier’s checks that were never deposited.
• Life Insurance Proceeds: Benefits from life insurance policies or annuities where the beneficiary cannot be found or has not filed a claim after the policyholder’s death.
• Contents of Safe Deposit Boxes: If rental fees go unpaid and the box remains unaccessed for a prolonged period, the contents can be turned over to the state.

The State Controller’s Office maintains a detailed list of all property types it holds, showcasing the vast scope of these unclaimed assets.

Less Common Unclaimed Property

Beyond the more common financial assets, other types of property can also become unclaimed:

• Court Deposits and Trust Funds: Money held by courts, such as unused bail bonds or funds from a lawsuit, if the rightful recipient is not found.
• Escrow Funds: Unclaimed funds from real estate transactions or other escrow agreements.
• Utility Deposits: Old deposits held by utility companies that were never refunded to former customers.
• Royalties: Unpaid royalties from mineral rights, literary works, or music that cannot be delivered to the owner.

The diversity of these assets underscores the importance of keeping meticulous records and maintaining regular contact with any entity that holds your money or property.

Can You Reclaim Unclaimed or Escheated Property?

Yes, reclaiming escheated property is absolutely possible in California. If you believe you or a loved one might have unclaimed property held by the state, here are the general steps to follow:

• Search the Database: Start by visiting the California State Controller’s Office website. They host a free, searchable database where you can enter your name, a deceased loved one’s name, or a business name to see if there are any reported unclaimed assets. This initial search will confirm if the property is being held.
• Initiate a Claim: If your search yields a match, the website will guide you through the process of starting a claim. You will likely need to complete an online claim form or print one out.
• Gather Required Documentation: The SCO will request specific documents to verify your identity and establish your right to the property. This is a vital step in preventing fraudulent claims.
• Submit Your Claim: Send the completed claim form and all supporting documents to the State Controller’s Office as instructed.
• Await Review and Approval: The SCO will review your submission. This process can take some time, depending on the complexity of the claim and the volume of submissions. Once approved, the property or its monetary value will be released to you.

Patience is key during the review period, but the system is designed to return property to its lawful owners.

How Can You Prevent Your Inheritance from Becoming Unclaimed?

Creating a comprehensive estate plan is the cornerstone of making sure your assets are distributed exactly as you wish. An estate plan is more than just a will; it is a collection of legal documents that outline how your property will be managed and distributed after your death, and how your affairs will be handled if you become incapacitated. A well-crafted plan typically includes:

• A Will: This document specifies who inherits your property and names an executor to carry out your wishes.
• Trusts: Various types of trusts can help manage and distribute assets, often avoiding probate and providing specific instructions for beneficiaries.
• Beneficiary Designations: These are crucial for accounts such as life insurance policies, retirement accounts (IRAs, 401(k)s), and sometimes bank accounts, as they dictate who receives the funds directly, often outside of a will.
• Powers of Attorney: These documents name individuals to make financial and healthcare decisions on your behalf if you cannot.

By putting these documents in place, you provide clear instructions, reduce potential family disputes, and significantly decrease the likelihood of your assets becoming lost or unclaimed.

Keeping Beneficiary Information and Records Updated

Even with a solid estate plan, it is crucial to keep all your beneficiary information and personal records up to date. Life changes, such as marriage, divorce, the birth of a child, or the death of a beneficiary, require updates to your estate plan and beneficiary designations. Regularly review your accounts (bank, investment, insurance) to confirm that the named beneficiaries are still your intended recipients and that their contact information is accurate.

Additionally, maintaining organized records of all your assets, account numbers, and contact details for financial institutions is crucial. Informing a trusted family member or your executor about where these records are kept can make their job much easier after your passing. Open communication with your family about your estate plans also helps them understand your wishes and know what to expect. These simple, ongoing actions can make a huge difference in making sure your legacy is claimed by those you intend.

For those seeking insightful, strategic, and results-oriented guidance on estate planning and probate matters, The Kiken Group, a Professional Corporation, is here to help. Click to call us at 657-213-3926 for a free consultation to discuss your estate planning needs.